The Fed’s fight against inflation is far from over, and It’s not yet time to claim victory former Treasury Secretary Larry Summers said this week.
What happened: The Fed recognizes the future is uncertain and is committed to doing what is necessary to address an essentially uncertain environment, Summers recommended in an interview with Bloomberg Television on Friday.
“I think the consensus has become way too complacent about inflation for a number of reasons,” he said. Even with the latest easing, inflation is still elevated compared to two years ago, he noted. Drawing an analogy with football before the Super Bowl, the former Treasury Secretary said we’re approaching the red zone in terms of inflation, which is difficult to navigate.
“And so I think the gains are going to be more difficult in terms of further reduction,” Summers said.
He also pointed out that there are a number of pullback factors, such as wholesale used car prices, that are likely to contribute positively to inflation. Financial conditions in terms of tightness in financial markets are likely back to what they were in late summer, he added.
“So I think, with that kind of picture, the prospect that we’re not on our path now where inflation is going to hit target levels and so this tightening cycle isn’t just about one more, two more, three more , 25 basis points point up, but something more fundamental,” Summers said.
“Well, I don’t think this is a moment for euphoria. And I think there’s a certain complacency setting in a lot of places.”
See also: The best inflation stocks
Why it matters: After steady easing of inflationary pressures since July 2022 and Fed presidency Jerome Powells Reference to disinflation In his recent speeches, the financial markets have recovered. This was despite the fact that several Fed officials stuck to their aggressive scripts in their public appearances.
The stock market retreated this week…
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