Former US Treasury Secretary Larry Summers Says He’s ‘Nervous’ About Inflation and Federal Reserve’s Next Move

Former United States Secretary of the Treasury Larry Summers is expressing apprehension about the inflation outlook in the world’s largest economy.

In an appearance at the All-In Summit 2023, Summers says that the Federal Reserve might be wrong in its views regarding the effectiveness of the measures it has taken to address inflation.

“I think there’s a larger, probably, risk that we don’t really have inflation on a secure path down below 3.5% and that the Fed thinks it’s got it under control and it doesn’t. And it’s going to have to go back to raising rates. So I’m nervous.”

As gaining control over inflation becomes less and less probable, Summers says the US economy is likely to slip into a recession based on historical precedent.

“There’s never been a time when inflation was above 4% and unemployment was below 4% and the US economy didn’t go into recession before that situation was resolved.”

The former treasury secretary also says that the Federal Reserve is to blame for putting the US monetary policy on the wrong path. He says the Fed bit off more than it could chew and is now attempting to put the economy back on course.

“I think that what we did in 2021 when the government basically infused $2.9 trillion into a rapidly recovering economy and when the Fed promised it was going to keep interest rates at zero till 2024, and when the Fed bought bonds on a massive scale, that put us way off course.

Since then we’ve been working our way on the monetary policy side back to course in basically reasonable ways.”

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