Former Treasury Secretary Larry Summers has warned that a potential rate cut by the Federal Reserve would be a grave mistake.
In a new interview with Bloomberg TV, Summers commented on the latest core consumer price index (CPI) numbers, which were higher than expected, and said no one should be surprised by the existence of accelerating inflation.
“I wasn’t really surprised by these numbers. In an economy that is growing faster than potential, with large and growing budget deficits and extremely accommodative fiscal conditions, unemployment is on the third wheel. There should be no expectation that inflation will remain strong or even accelerate.
Summers recently published a paper that aims to paint an alternative, more accurate view of inflation by incorporating economist Arthur Okun’s pre-1983 inflation measurement system, which takes into account personal interest rates and housing finance costs. Co-authored.
The paper argues that using the Okun-era system, the Fed’s current data (using the “supercore inflation” concept) significantly underestimates the amount of inflation the United States is dealing with.
Summers said cutting interest rates in June would be a serious mistake on the Fed’s part, given that inflation is almost certainly much higher than officially acknowledged.
“It wasn’t me or any outside observer who emphasized the concept of super-core inflation, which removes temporary things and removes things like housing. And by that measure, inflation is 6%. The 3-month interest rate exceeds the 6-month interest rate, and the 6-month interest rate exceeds the 1-year interest rate.
This supports the idea that the neutral interest rate is well above the 2.6% level that the Fed has been using as its north star…
We need to take seriously the possibility that the next move in interest rates will be an increase rather than a decrease.
And anything could happen. It’s possible that markets will crash and indicators worsen, but based on current facts, cutting interest rates in June is as dangerous and egregious as the mistake the Fed made in the summer of 2021 when it didn’t cut rates. It seems to me that this would be a mistake. I don’t understand the story about inflation. ”
Never miss a beat – Subscribe to get email alerts delivered straight to your inbox
Check price action
follow me twitter, Facebook and telegram
Surf the Daily Hoddle Mix
 
Disclaimer: The opinions expressed on The Daily Hodl do not constitute investment advice. Investors should perform due diligence before making high-risk investments in Bitcoin, cryptocurrencies, or digital assets. Please note that transfers and transactions are made at your own risk and any losses you may incur are your responsibility. The Daily Hodl does not recommend buying or selling any cryptocurrencies or digital assets. The Daily Hodl is also not an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Generated image: DALLE3