(Bloomberg) -- US Treasury Secretary Janet Yellen said she still sees underlying price pressures receding even as a tight housing supply has helped stall the downward path of inflation.

“To me the fundamentals are: inflation expectations — they’re well under control, and the labor market — strong but not a significant source of inflationary pressure,” Yellen said Friday in an interview with Bloomberg News in Sedona, Arizona.

The Treasury chief pointed to data out Friday showing average hourly earnings rose 0.2% in April.

“This is one data point, I don’t want to overemphasize,” Yellen said, “but certainly two tenths a month is consistent, even a little bit below what’s consistent, I think, with 2% inflation.”

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Yellen has for months argued that shelter costs would decline, helping to tackle the so-called last mile of bringing inflation into line with the Federal Reserve’s 2% target. The central bank’s most closely watched measure for underlying price pressures has declined to 2.8% from a peak of 5.6% in early 2022, but progress has stalled recently, causing Fed officials to push back expectations for when they may begin cutting rates.

Yellen conceded that shelter inflation had shown slower-than-expected progress to date, largely because of supply issues.

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“Housing is a real problem in the United States due to a huge shortage of affordable housing, and in part because of high interest rates,” she said. “Housing has stalled. It’s one of the most sensitive sectors, so new housing construction isn’t at levels that would be needed to really moderate the price of housing.”

She added, however, that it’s “highly likely” that shelter costs will come down, based on her reading of rental-price data from new apartments and single-family homes that are rented out, which has stabilized.

“Even though the lag is a little longer than I would have expected, I believe that the pace of housing inflation will come down so that it’s in line with the new rental market,” she said.

Yellen is in Sedona to speak at a conference hosted by the McCain Foundation, named for the late Senator from Arizona, John McCain. In the text of her remarks, excerpts of which were released Wednesday by the Treasury, Yellen warned that threats to America’s democratic institutions would undermine economic growth and financial stability.

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