The consumer price index rose 7% in the 12 months through December, the most in almost 40 years, damaging President Joe Biden’s popularity and putting more pressure on the Federal Reserve to sharply tighten monetary policy. The Fed in December signaled it’s likely to raise interest rates by three-quarters of a percentage point and begin trimming its $8.9 trillion balance sheet this year.

Yellen said inflation is a “shared responsibility” between the administration and the Fed, and expressed confidence the central bank was moving appropriately.

The Treasury chief acknowledged the U.S. economy had been buoyed in 2021 by fiscal stimulus, which is now waning, but said strong household balance sheets should continue to keep demand healthy.

“Households are in good financial shape — in many ways have come out of this even stronger than they were pre-pandemic,” she said. “There’s a buffer stock of savings that accumulated that I think will continue to support the economy in the years ahead, even with less fiscal support.”