/Yellen Says Interest Rates May Rise to Prevent Economy From ‘Overheating’
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Yellen Says Interest Rates May Rise to Prevent Economy From ‘Overheating’

Treasury Secretary Janet Yellen says that interest rates may rise to help keep the economy from “overheating.” Yellen says the rise could happen in order to stave off runaway economic growth in the U.S. brought on partly by trillions in recent government stimulus measures.

“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat,” Yellen said during an economic summit hosted by The Atlantic. “Even though the additional spending is relatively small to the size of the economy, it could cause some very modest increases in interest rates.”

Since the coronavirus pandemic began a little more than one year ago, Congress has approved nearly $6 trillion in federal spending designed to keep the nation’s economy afloat. The exorbitant level of spending pushed the nation’s deficit to a record $3.1 trillion for the 2020 fiscal year and a high of $1.7 trillion for the first half of fiscal 2021.

Congressional Democrats are now pushing forward with passing another $4 trillion in spending that would be the basis of President Biden’s sweeping “Build Back Better” agenda. The pair of proposals, known as the American Jobs Plan and the American Families Plan, would be offset by tax increases on wealthy Americans and corporations.

While Yellen – who led the Federal Reserve from 2014 to 2018 – said the U.S. needs to focus on long-term fiscal responsibility, she argued the unprecedented level of spending is needed to invest in the economy and ensure that it’s “competitive and productive.”

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