Yellen Predicts Trump’s Tariffs Will Increase Inflation to 3% Yearly

Former Treasury Secretary Janet Yellen has expressed concerns that President Donald Trump’s tariffs will lead to rising prices and a decrease in average household income, even amidst a declining trend in U.S. inflation rates. During an appearance on CNBC’s “Money Movers,” Yellen projected that inflation could reach at least 3% year-over-year due to the tariffs.

She emphasized the uncertainty surrounding which tariffs would actually take effect, but remained confident in their potential impact on pricing. Yellen highlighted that these tariffs could result in an average household income reduction of around $1,000.

She acknowledged that this figure might be even higher depending on how the tariff situation unfolds. Her comments coincided with recent data from the U.S. Bureau of Labor Statistics indicating that inflation has been rising more slowly than anticipated.

In response to this economic climate, Trump has leveraged the inflation trend to criticize Federal Reserve Chair Jerome Powell, referring to him as a “numbskull” in a speech at the White House. Meanwhile, supporters of Trump argue that tariffs do not contribute to inflation, contrasting Yellen’s perspective.

Yellen, who previously led the Federal Reserve from 2014 to 2018, called for the central bank to be cautious about potential second-round effects, including wage increases and inflation expectations that might exacerbate inflationary pressures. She noted that the Federal Reserve does not have a precise grasp on how tariffs will influence consumer spending or the labor market and suggested that the Fed is likely to maintain a wait-and-see approach in response to these uncertainties.