“My guess is that at the end of the year inflation will, for this year, come out pretty close to 5%,” Summers told Bloomberg Television’s “Wall Street Week” with David Westin. “It would surprise me if we had 5% inflation with no effect on inflation expectations.”
Summers, a paid contributor to Bloomberg, has repeatedly predicted massive monetary and fiscal stimulus alongside the reopening of the economy would spark considerable price pressures. That’s at odds with economists in the White House and Federal Reserve, who argue the recent inflation surge will soon pass.
Consumer prices advanced 5% in May from the previous year. Treasury Secretary Janet Yellen told lawmakers this week that she expected annual inflation to be below that level by the end of this year.
Asked how financial markets may behave in the rest of 2021, Summers said “there will probably be more turbulence” as traders react to faster inflation by pushing up bond yields.
“We’ve got a lot of processing ahead of us in markets,” he said.
Summers, who now teaches at Harvard University, also praised President Joe Biden’s tentative deal with a group of Democratic and Republican senators on a $579 billion infrastructure plan and echoed the White House’s call for even more to be spent on “human infrastructure.”
“There is a lot that is left to do that should be supported,” Summers said. “The investment will strengthen our economy.”
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