Tags: larry summers | fed | policy | risk | inflation

Larry Summers: Too-Tight Fed Policy Greater Risk Than Inflation

Wednesday, 27 June 2018 02:24 PM

Former U.S. Treasury Secretary Lawrence Summers said Federal Reserve interest-rate hikes that slow the nearly decade-long expansion are a greater risk to the economy than inflation.

“Is the strategy one of relying on the Phillips curve and trying to preempt inflation, or is the strategy one of trying to let the economy grow as much as possible and respond to inflation problems as they arise,” Summers said in an interview Wednesday on Bloomberg Television. “I would very much favor the second.”

The Fed raised interest rates earlier this month, the second time this year and the seventh hike since late-2015. Policy makers expect the inflation rate to slightly overshoot the target of 2 percent this year. They have missed the target for most of the past six years.

“The dangers are still much more on the side of too much slowdown than they are of too much inflation,” said Summers, a Harvard University economist and former White House adviser in President Barack Obama’s administration. “We still haven’t really solidly hit the 2 percent inflation target so I’m not seriously concerned about the Fed pursuing too easy a policy. If anything, the dangers are the Fed will pursue too tight of a policy.”

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Former U.S. Treasury Secretary Lawrence Summers said Federal Reserve interest-rate hikes that slow the nearly decade-long expansion are a greater risk to the economy than inflation.
larry summers, fed, policy, risk, inflation
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2018-24-27
Wednesday, 27 June 2018 02:24 PM
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