Treasury Secretary Janet Yellen told an international audience in Washington that fighting inflation was the Biden administration’s top priority, a message that won’t comfort countries feeling the pain from a strong dollar.
“I had the opportunity to speak with counterparts from a broad range of countries about the way global macroeconomic forces are affecting their countries,” she said, according to remarks prepared for delivery Friday. “This week has left us better informed and better coordinated.”
The Treasury chief said that differences in economic shocks between countries and in the policy responses to them largely explain the appreciation in the US dollar. And she reiterated that “market-determined exchange rates are the best regime for the dollar, that’s what we’re supportive of.”
“There are spillovers from tightening monetary policy in advanced countries dealing with inflation to developing economies,” exacerbating their debt problems, Yellen acknowledged. “That’s one of the reasons we’re so focused on providing relief.”
A former Federal Reserve chair herself, Yellen left no doubt that she believes the US central bank needs to plow ahead with more interest-rate hikes to tackle inflation in the wake of another disappointing report on prices in the US this week.
“We are determined about the jobs we have to do at home,” Yellen said, before repeating her assessment that “we have more work to do to get price increases under control.”
Yellen spoke as the International Monetary Fund’s annual meetings draw to a close. The gathering brought global finance and central bank chiefs -- along with their development and banking counterparts -- to the US capital at a fragile moment for the global economy.
Rising interest rates have drawn capital to the US in recent months, contributing to a strengthening of the greenback. That makes it harder for other countries to fight their own inflation battles, and imposes particular pain on governments struggling to repay dollar-denominated debt.
The Treasury chief implored creditor countries -- again mentioning China by name -- to do more to help struggling nations.
“We must support vulnerable countries as they navigate the immediate economic challenges,” she said. “All major official bilateral creditors, including China, should also deliver on our G-20 commitments to provide debt relief for low-income countries.”