“There is little evidence of a downward trend in core inflation” and the Fed “needs to do more”


Larry Summers, a Harvard professor, economist, director of the National Economic Council under President Barack Obama and Treasury Secretary under President Bill Clinton, said in an interview that aired on Friday’s issue of Bloomberg’s “Wall Street Week.” There is a lot of evidence that inflation is trending downward,” and that the Federal Reserve has “a lot more to do.” And that terminal rate should be close to 6%.

Summers said: “I think, overall, we don’t seem to have much evidence of a fundamental downward trend in inflation. I think the inflation event is a deviation around the 4.5 or 5 inflation rate. And if it’s close to the right, that means the Fed needs to do more.

He added: “I think there’s a good chance we’ll end up with a terminal rate close to 6. After all, we have inflation near 5% and interest rates around 5%. Thus, interest rates and inflation in the same range do not indicate much downward pressure on inflation. So I’m very open to changing my mind, and I think confident statements about these things are wrong.

Follow up Ian Hanchett is on Twitter @IanHanchett


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