By Andrea Shalal
DETROIT (Reuters) -U.S. Treasury Secretary Janet Yellen said on Wednesday that recent consumer price inflation data was "a tad higher" than expectations, but Americans should focus on longer-term declines in inflation trends and a strong economy and rising wages.
"I think it is a tremendous mistake to focus on minor fluctuations and to have failed to see the longer-term and bigger trends. And the trend here is that inflation is moving decisively down," Yellen told the Detroit Economic Club, where she appeared with Michigan Governor Gretchen Whitmer.
The Labor Department reported on Tuesday that the consumer price index (CPI) rose 0.3% in January, more than the 0.2% gain expected by economists in a Reuters poll, prompting a decline in stock prices as Wall Street speculated on a potentially longer wait for the Federal Reserve to start cutting interest rates.
Yellen said the burst of inflation following the COVID-19 pandemic has subsided almost to levels consistent with the U.S. central bank's 2% annual inflation target.
Yellen told reporters that Americans had been through a hard time with COVID and prices of some significant things - rental housing and food - were higher than before the pandemic, but wages were also increasing more than prices were.
"Over time, as inflation normalizes at a very low level, and wages continue increasing, American households will feel more secure this episode is behind them, and they'll be able to see they're getting ahead," she said.
Yellen said the Biden administration continued to work to reduce the cost of health and energy.
BATTLEGROUND STATES
Yellen was visiting Detroit on a swing through the election battleground states of Michigan and Pennsylvania to tout U.S. President Joe Biden's economic policies, including infrastructure, health care and clean energy investments, and try to persuade skeptical voters the economy is performing well, with falling inflation and historically low unemployment.
She said the price of gasoline has fallen $1.90 per gallon from its high mark in 2022, shortly after Russia's invasion of Ukraine, to under $3 per gallon, while prices of other key goods also have fallen, despite higher housing costs.
"Eggs have fallen back to pretty close to pre-pandemic levels, new and used car prices and truck prices have declined as well, televisions - so some prices are falling," she said.
Yellen said Tuesday's CPI report showed average hourly earnings went up over the last year by 1.3%, with a 1.6% increase for blue-collar workers.
She repeated Treasury research that workers earning the median U.S. wage can afford the same basket of goods and services as in 2019, but with $1,400 in savings left over.
Yellen's remarks this week build on earlier stops in Illinois, Wisconsin, Nevada and North Carolina. Pennsylvania and Michigan are among the seven states Biden's reelection campaign considers election battlegrounds because their voters' preferences could swing to either party and determine the outcome of November's race.
But the administration's repeated efforts to showcase its economic successes have thus far failed to convince the American public, according to recent polls.
A recent Reuters/Ipsos poll showed Biden is running six percentage points behind Republican frontrunner former President Donald Trump, with voters focused on immigration challenges, Biden's age and still unhappy about the economy despite big improvements since he took office in 2021.
Asked which person dead or alive she would like to have lunch with, Yellen chose influential 20th century British economist John Maynard Keynes.
"He changed the way all of us understand business cycles, public policy and financial markets. And a long time ago, Richard Nixon said, 'we're all Keynesians now,'" Yellen said, adding: "He really had deep insights into how economies work."
When asked the same question, Whitmer, a Democrat, said she would choose Yellen, whom she had introduced as an inspiring role model - "She is a badass. She eats, breathes and sleeps economics" - and because she had only been able to spend 10 minutes with her before the event on Wednesday.