‘Higher for Longer’: Yellen Acknowledges U.S. Economic Reality

Even Janet Yellen is finally admitting it: the pre-pandemic inflation and interest rate environment won’t return anytime soon.

The updated White House budget outlook raised 3-month Treasury rate projections from 3.8% to 5.1%, and 10-year projections from 3.6% to 4.4%.

“The longer-term rate will remain higher for longer,” explains Josh Steiner in this clip from The Call @ Hedgeye. “Obviously, anybody listening to us for a while has heard the same.”

“It’s sort of a) an acknowledgement that the reality is higher for longer, and b) an awareness that putting out budget deficit projections that reflect a more probabilistic rate backdrop are becoming a political liability in an election year.”

“Yellen and Lael Brainard (director of the National Economic Council) are the modern monetary theory (MMT) duo,” adds Keith McCullough. “They want to have their cake and eat it too. They’re sitting here saying, ‘No recession, no government spending problem, there’s no need to talk about these things,’ and now they do.”