Lawrence Summers, the former Treasury Secretary, encouraged the Federal Reserve to pull back on signaling its next move following the expected rate hike next week due to the current uncertain outlook.
Summers told Bloomberg Television’s Wall Street Week that he doesn’t believe it is time to be committing to rate hikes as there are indications of softness “that we have seen from a number of quarters.”
However, he also doesn’t believe the possibility of rate hikes should be taken off the table.
Despite slowing down in recent months, inflation is still elevated and above the Fed’s 2% target.
Bloomberg said Summers said the Fed needs to “maintain maximum flexibility in an economy where things could go either way” and that they are “driving the vehicle on a very, very foggy night.”
Summers also said the optimism in financial markets over recent months is also the fact that financial conditions have “moved substantially towards easing in the last several months.”
Summers also believes that in the longer term, rates will settle at a higher level compared to pre-pandemic.
Summers was quoted by Bloomberg as saying he sees “more room for inflation to settle in a bit above 2,” and he sees more room for “real rates to settle in above 0.5 than I do for the error to be in the other direction.”
Source: Economy - investing.com
