By Yasin Ebrahim
Investing.com -- Treasury Secretary Janet Yellen said Thursday that the Russia-Ukraine war is expected to add to the pace of red-hot inflation next month, but indicated she as confident in the Federal Reserve's ability to curb inflation and deliver a soft landing that would see the U.S. avoid a recession.
"Inflation is a problem and it's one that we need to address but I don't expect a recession in the United States," Yellen said in an interview with CNBC on Thursday.
The former Fed chair also said that she is expected the central bank will be able to bring inflation down without overshooting on the tightening monetary policy, which has historically played a role in bringing about a recession. "I think it's appropriate for them to take action, but a soft landing is what I expect," the Treasury Secretary said.
The comments arrived just as investor focus on the Fed, ahead of the central bank's meeting next week, has intensified following data showing that inflation remained at its highest pace since 1982.
“The risk is that the inflation we are enduring now could become more entrenched, as it did in the 1970s. That is why the Fed is so wedded to raising rates starting in March,” said Diane Swonk, chief economist at Grant Thornton.
Inflation will remain red-hot as impact of the Russia-Ukraine war will boost the price of key commodities including oil, wheat and precious metals.
"My guess is that next month we'll see further evidence of an impact on U.S. inflation as a result of Putin's war on Ukraine," Yellen said. "[W]e're likely to see another year, in which 12 month inflation numbers remain very uncomfortably high."
The Federal Reserve is expected to increase its benchmark rate for the first time in more than three years after the culmination of its two-day meeting on Mar. 15-16.