Summers says Fed officials are entering a ‘new era’ as the temperature rises – News Couple

Summers says Fed officials are entering a ‘new era’ as the temperature rises

(Bloomberg) — Former US Treasury Secretary Lawrence Summers said federal policy makers are signaling a “new era” in which they recognize that the US economy is heating up with inflation at its fastest in three decades.

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Speaking on Bloomberg Television’s “Wall Street Week” with David Westin, Summers said Federal Reserve Chair Jerome Powell and Governor Lyle Brainard this week used speech that “harms a new era here for the Fed.”

“They know we have an overheating economy,” he said. “The new problem is how to quietly land on this economy.”

President Joe Biden on Monday nominated Powell to serve another four-year term at the Federal Reserve and elevated Brainard to become Vice President of the Central Bank. Summers, a paid contributor to Bloomberg, praised the choices.

At a White House event on Monday, Powell said the Fed would seek to “prevent rising inflation from taking hold.” Brainard said it’s important to bring down inflation at a time when people are focused on their jobs and how far their salaries will go.


Summers has been warning throughout the year that monetary policymakers, including Powell, have been ignoring the risks of persistently high inflation if not addressed.

Summers said the Fed was “behind the party’s performance to acknowledge excessive nervousness.” “We are looking forward to the challenge of slowing the overheating economy.”

Several Fed officials argued that the inflation shock would be “temporary” and indicated their willingness to leave the economy overheated in order to boost employment. But this month, policymakers decided to start withdrawing their massive asset purchases. Some later said they may need to roll back faster than the current pace of tapering. They have not yet announced a timetable for increasing interest rates, linking this decision to maximizing job opportunities.

“The Fed has pretty foolishly asserted that it will never begin to raise monetary policy until we reach full employment,” Summers said. “They’ll have to figure out how to maneuver within their framework.”

Government data showed on Wednesday that US consumers continued to spend in October and that the number of people continuing to collect regular unemployment insurance fell to the lowest level of the epidemic this month.

“All the numbers indicate a lot of strength,” Summers said. “All numbers indicate limited capacity.”

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