Saturday, August 6, 2022

Rare Synchronous Summers + Kruman: Fed is not yet time to change rate hike path

Economist Summers said he was concerned that the Federal Reserve (Fed), given the slowdown in post-headline inflation data, would think tougher measures were working because the Fed has a lot of unfinished business.

“I am deeply concerned about the prospect of positive news on the next non-core inflation,” Summers said. July CPI due next week; Overall the CPI is expected to fall due to the recent decline in energy prices, particularly gasoline; With the economy showing few signs of slowing, the danger is that “it may make the Fed think the situation is under control.”

However, he noted that the US economy remains “overheated”, as manifested by a sharp rise in employment and wages in July; An “emerging” labor market means “inflation is always on, or even accelerating.”

“What the numbers say to me is that the economy is heating up, it’s out of control, it’s not on track to get it under control,” he said. “My anxiety is really huge.”

Samar said he fights with me oftenNobelEconomics Award WinnerkrumanoThis time also it has been said seriously that now is not the time for the Fed to change the way of raising interest rates.

“The good news we will get on short-term inflation is not evidence that our strategy has worked, nor does it provide evidence of an easing of the reason for changes in monetary policy”.

The danger, Summers said, is that “we’re going to be in the 1970s, when inflation persisted because we didn’t do enough.” Excluding raw goods such as food and energy, “all reasonable measures of core inflation are around 5%, which is higher than Nixon’s imposition of price controls. This is unacceptable from any perspective.”

Summers again criticized Fed Chairman Powell, said in the last press conferenceRate of interestIt would be unfair to say that it has reached “neutrality”. “I don’t think the Fed has straightened its thread now. Without a big hike in real rates, we’re just laying the groundwork for stable inflation,” he said.

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