In an interview published in the Bloomberg Wall Street Week issue on Friday, Harvard professor, economist, director of the National Economic Council under President Barack Obama, and Secretary of the Treasury under President Bill Clinton, Larry Summers, reacted to the Federal Reserve’s last minutes. “The Fed doesn’t know where it is” and the Fed is “not ready to be realistic” that “inflation is likely to return to target levels without a significant rise in unemployment,” he said.
Summers said the minutes “confirmed that I was suspicious, the Fed didn’t know where he was, that the world was very blurry right now, and that the minutes of the meeting were a very bad way to convey a collective message.” Look, the Fed has a fundamental problem that it’s not ready to be realistic about. This means that inflation is unlikely to be reduced to target levels without a significant increase in unemployment. They want to be very concerned about unemployment and inflation. The truth is that it is probably unrealistic to think that they can completely reduce inflation without increasing unemployment. And they don’t want to admit it, and it creates a certain confusion in all their explanations. I sympathize and understand why they don’t want to accept it. Part of the problem is that they are overcommitted to communicating. That’s why I think they are in a very difficult situation. I don’t know how long they will choose to endure the pain on the deer side and how much they will accept it on the flirty side. This remains to be seen. I suspect in some ways they didn’t know what was going to happen either. They should be concerned that financial conditions are now weaker than they were at the last Fed meeting. If monetary conditions ease significantly in the middle of the tightening cycle, this should discourage the central bank.
He continued: “David, there is another aspect of the situation that I think is very important and underestimated. And it’s because everyone is focused and rightfully focused on geopolitics, what’s happening in Russia and Ukraine, what’s going on with the drought, they don’t fully understand that oil prices and wheat prices have dropped dramatically. and a significant decline is expected in the future. This drives relatively tight inflation expectations. And those who quickly focus on the core concepts of inflation when headline inflation is higher than core inflation can’t help but do so when headline inflation is lower than core inflation. And I don’t see that we’re really making much progress on core inflation. I don’t look at salary figures. I don’t see that it has anything to do with the median or the cropped mean. Therefore, I think we have a serious inflationary problem going forward.”
Source: Breitbart
