In a speech at the Atlantic Council, a nonpartisan think tank on international affairs, Yellen spoke of the dramatic worldwide spike in costs for food and fuel – an upward trajectory started in part by the pandemic and supply chain issues and then drastically worsened by the war.
“It’s really a grave concern,” Yellen said, noting the vast humanitarian and economic impact.
The rising costs not only boost inflation but also diminish demand, as households spend more of their earnings on necessities like putting food on the table and heating their homes, she said.
“Particularly in Europe, which is most vulnerable, I worry more about recession prospects,” she said, pointing to the region’s dependence on Russian energy exports. “But it is likely to be a hit to global growth.”
A broader concern extends to how hundreds of millions of people around the globe will be able to afford and access food, she said. More than 275 million people are facing acute food insecurity.
Yellen also sent a stern warning to countries that are not moving to cut financial ties with Russia or that seek to undermine sanctions imposed due to the war in Ukraine.
“While many countries have taken a unified stand against Russia’s actions and many companies have quickly and voluntarily severed business relationships with Russia, some countries and companies have not,” Yellen said.
“Let me now say a few words to those countries who are currently sitting on the fence, perhaps seeing an opportunity to gain by preserving their relationship with Russia and backfilling the void left by others. Such motivations are short-sighted,” Yellen said.
Noting China’s “special relationship with Russia,” Yellen said she hoped that an outcome of any discussions between the two countries would be an end to the war.
“Going forward, it will be increasingly difficult to separate economic issues from broader considerations of national interest, including national security,” she said, adding that China needs to respect the sanctions placed on Russia.
Some nations – including China and India – have not backed down away from Russia, given their need to import vast amounts of energy.
“Let’s be clear,” Yellen said, “the unified coalition of sanctioning countries will not be indifferent to actions that undermine the sanctions we’ve put in place.”
Last week, in testimony before the House Financial Services Committee, Yellen warned that Russia’s actions are having “enormous” economic repercussions. This week, new federal data showed the Consumer Price Index had risen 8.5% for the year ended in March, propelled by a surge in energy prices. Separately, the Producer Price Index, which tracks the average changes in selling prices that domestic producers receive over time, rose 11.2%, its biggest increase ever.
Yellen declined to comment on the Federal Reserve’s plans to mitigate rising inflation domestically, but stressed that the US economy and its labor market are “very strong” right now.
However, Yellen said she is keeping an eye on new Covid-related lockdowns in China, which could put additional pressure on global supply chains.
Next week’s International Monetary Fund and World Bank conference will be critical in addressing the global consequences of Russia’s war in Ukraine, Yellen said, as well as helping to mitigate the negative effects on developing countries and vulnerable food systems.