Ex-Treasury Chief Rubin Sees 'Material Risk' High Inflation Will Be Enduring

Former Treasury Secretary Robert Rubin said there’s a “material risk” that the U.S. could see persistently elevated inflation and urged policy makers to be careful to avoid overheating.

Rubin, who served in the Clinton administration, also said ex-Obama administration adviser Larry Summers has done “a great public service” by ringing alarm bells that the recent spike in prices may fail to dissipate amid trillions of dollars in pandemic-relief spending.

“We have a strong economy,” Rubin said Monday during a virtual Aspen Ideas Festival event. While inflation may be transitory, he said “there’s a material risk of it being enduring.”

“As an investor and as a policy maker, I would have a cautious bias,” Rubin said.

Summers, who succeeded Rubin during the Clinton administration as Treasury chief, has been a vocal proponent this year of the idea that policy makers are risking runaway inflation. He sees prices rising “pretty close” to 5% at the end of this year.

Read more: Summers Sees U.S. Inflation Ending 2021 ‘Pretty Close’ to 5%

While Summers has indicated that President Joe Biden’s stimulus plans have been too big, Rubin said the spending enacted so far -- specifically the $1.9 trillion pandemic relief bill -- has been “essential.”

Janet Yellen, the current Treasury secretary, is a leading voice in the Biden administration that inflation will remain “transitory.”

Consumer prices advanced 5% in May from a year earlier, the fastest pace since 2008. Yellen told lawmakers last week that she expected annual inflation to be below that level by the end of 2021. Federal Reserve policy makers are forecasting a separate inflation index to rise 3.4% in the fourth quarter of this year and 2.1% in late 2022.