Janet Yellen Anticipates Soft Landing, Sees Inflation Trending Lower Toward Fed's 2% Goal In 2024

U.S. Treasury Secretary Janet Yellen expects inflation to continue to trend lower toward the Federal Reserve's target of 2% in 2024.

Inflation Outlook: Yellen issued a forecast for consumer prices Wednesday on CNBC's "Squawk On The Street."

"My expectation is that inflation will continue to come down ... I think when we come to the end of 2024, 'two' is certainly likely to be the first numeral," the Treasury secretary said.

The Labor Department on Tuesday said the Consumer Price Index (CPI) was up 3.1% on an annual basis in November, which was in line with economist estimates. Yet the CPI was up 0.1% on a month-over-month basis as a decline in gas prices was more than offset by rising shelter prices. The number came in above expectations for a flat reading.

The Fed has been able to deliver a soft landing in 2023, but many think it will be a difficult feat in 2024. Yellen told CNBC that she continues to expect a soft landing for the economy next year, but acknowledged there are risks to her forecast.

"Monetary policy is an art and not exactly a science yet and it requires skill and a good dose of luck to get that exactly right," Yellen said. 

The Fed's Next Move: The Fed is set to hold its final policy meeting of the year on Wednesday and the central bank is expected to leave rates unchanged. The Fed will also publish new economic projections, which will give insights about where the committee expects rates to go in the coming months.

Although recession remains a risk, the Treasury secretary said she doesn't believe it's "particularly high." She anticipates that consumer spending will slow, but to more normal levels that are consistent with trend growth. 

When asked about the potential for the Fed to cut rates next year, Yellen said she isn't going to give the central bank advice on what it should do. 

"I'm very happy with the outcomes we've seen in the economy over the last year or so and I'm going to trust them to make good calls," Yellen said. 

The Fed's decision on rates is due at 2 p.m. ET. Fed Chair Jerome Powell will hold a press conference at 2:30 p.m. ET to further discuss the Fed's decision.

Read Next: Federal Reserve's Final 2023 Meeting: FOMC's Economic Projections Crucial, Dot Plot Weeds Out Hawks, Doves

Photo: courtesy of the Federal Reserve.