So much for upside in the markets.
Treasury Secretary Janet Yellen just said interest rates may have to rise to keep the U.S. economy from overheating on stimulus spending. All after Congress allocated about $5.3 trillion in stimulus spending to date. Biden now wants another $4 trillion on infrastructure.
“It may be that interest rates will have to rise somewhat to make sure that our economy doesn’t overheat,” Yellen said, as quoted by CNBC. “Even though additional spending is relatively small to the size of the economy, it could cause some very modest increases in interest rates.”
Yellen also said she’s not concerned about inflation becoming a problem, even though it may already be a major problem. In fact, according to Warren Buffett, “We are seeing very substantial inflation. We are raising prices. People are raising prices to us and it’s being accepted,” as quoted by CNBC.
CNBC also noted that, “Inflation has begun to accelerate recently due to multiple factors, including increasing demand and struggles with some areas of the supply chain, as well as just easier comparisons with the pace of a year ago. The core personal consumption expenditures price index, which excludes volatile food and energy prices, rose 1.8% in March, the fastest pace since February 2020. The headline number increased 2.3%, the quickest pace for that measure since 2018.”
At the time of this writing, the Dow was down 276 points. The S&P 500 was down about 63, as the NASDAQ sank by nearly 405 points.