U.S. Treasury Secretary Janet Yellen warned on Tuesday that interest rates may have to rise to keep the U.S. economy from overheating, comments that have exacerbated the selloff in tech stocks.

The former Federal Reserve chairman made the remarks against the background of the Biden administration’s plans for $ 4 billion in Infrastructure and social spending, in addition to several cycles of economic recovery due to the pandemic.

“Interest rates may need to increase somewhat to ensure our economy does not overheat, even though the additional spending is relatively small relative to the size of the economy,” she said. at an event organized by The Atlantic magazine. .

“So that could lead to very modest increases in interest rates to get that reallocation. But these are investments that our economy needs to be competitive and productive. “

Investors and economists have been in a heated debate over whether the trillions of dollars in additional federal spending will trigger a jolt of inflation, and whether the stimulus checks already sent to consumers are contributing to a market rally that has taken stocks to record levels.

Jay Powell, the current Fed chairman, has said he believes inflation will only be “transient” and the central bank has pledged to stick firmly to ultra-loose monetary policy until. that much more progress has been made in economic recovery.

The possibility of interest rates rising, reducing the attractiveness of holding stocks in high-growth companies, has been a risk reported by many investors since Joe Biden’s US presidential victory, even as markets continued. to increase.

Yellen’s comments added further pressure on shares of high-growth companies, which had already fallen sharply at the start of Tuesday’s trading session. The high-tech Nasdaq Composite was down 2.8% at noon in New York, while the benchmark S&P 500 was 1.4% lower.

Market interest rates, however, did not change much after these remarks, with the 10-year Treasury yield coming in at 1.59 percent.

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