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Prices seem to be easing. Is it enough for the Fed to stop raising interest rates?


Inflation seems to be easing after months of interest rate hikes by the Fed. But what might that mean for the U.S. economy? NPR host Michel Martin put this question to Treasury Secretary Janet Yellen.

JANET YELLEN: Inflation has really been quite moderate, quite low for the last six months or so, importantly, because of lower energy prices. We continue to see improvement in supply chains. Goods prices have actually been falling. And some of the supply chain issues that pushed up the prices of goods and commodities, those have really turned around. Rent indexes continue to rise. But, really, we see those coming down substantially over the next six months or so.

MICHEL MARTIN, BYLINE: I mean, I think everybody remembers that you were chair of the Fed from 2014 to 2018. And the Fed is trying to control high inflation by raising interest rates. There's still concern that the rates could go so high that it triggers a recession. Are you confident that the Fed can achieve a soft landing while raising interest rates as much as they've been?

YELLEN: Well, I think we have an independent Fed. I trust them to make the best judgments that they can about what's necessary to accomplish their dual mandate, which is to bring inflation down and to try to maintain a strong labor market. I think there is a path there if it makes that possible. But I'm not - wouldn't try to second-guess the Fed.

MARTIN: Very diplomatic. House Republicans passed a bill this week to roll back the additional IRS funding that was included in the Inflation Reduction Act. That's not likely to happen given that the Democrats control the Senate. They oppose this. There's a veto threat from the White House. But could you just tell people why the administration feels that the IRS needs this additional funding?

YELLEN: We have an extremely unfair tax system in which honest lower- and middle-income households pay the taxes that are due. It's mainly reported to the IRS on W-2 forms. And the IRS knows about that income. But they're failing to collect taxes from very wealthy and extremely high-income taxpayers. It's estimated that there is a loss of - on the order of $7 trillion in tax revenues over the next decade, almost $1 trillion a year, because the IRS simply hasn't been able to hire the staff it needs to do the sophisticated audits to collect that. On top of that, Americans deserve someone, when they call the IRS, will answer the telephone. And they really deserve much more modern and efficient ways of interacting with the IRS. And the allocation in the Inflation Reduction Act of $80 billion over 10 years to the IRS is what it needs to make sure that we have a fair tax system.

MARTIN: So it's an equity issue. It's also a customer service issue. And I also think I hear you saying that tax collectors are basically being outgunned by wealthy tax cheats. Is that about right?

YELLEN: I think that's fair.

MARTIN: What's going to be your metric of success for the year? If you and I were to speak at the same time next year, what will you consider your major accomplishments?

YELLEN: My priorities would be to see inflation come down to much lower levels and to do that in the context of a job market that remains strong, with jobs readily available for people who want to work. We're seeing a renaissance of manufacturing in the clean energy sector, in semiconductors, infrastructure jobs. And we're going to see improved productivity and faster growth and improvements in parts of the country, in communities that have suffered for a long time and haven't enjoyed some of the expansion that we have seen in the coasts, in the part of the United States that have done very well.

BROWN: That was Treasury Secretary Janet Yellen in conversation with NPR's Michel Martin. Transcript provided by NPR, Copyright NPR.