While speaking with Bloomberg on Wednesday, Harvard Professor, economist, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton Larry Summers stated that the August inflation numbers show “no sign” “that we have a 2% inflation economy, now or in prospect.” And that the Federal Reserve is underestimating “the magnitude of the swing in the federal budget this year that we’ve had towards big expansion” like it did with the 2021 fiscal stimulus.
Summers said, “There is no sign in any of this that we have a 2% inflation economy, now or in prospect. For all the happiness, the level of inflation that we’re going to be forecasting for the year is well above what people forecast at the beginning of the year. So, I think we’ve got still a difficult situation to manage. … I think it’s a very narrow window to achieve that soft landing.”
He added, “I think the argument that’s underdone is the magnitude of the swing in the federal budget this year that we’ve had towards big expansion. I think Chairman Powell was not nearly as concerned as he should have been about the scale of fiscal stimulus in 2021. And I’d rather see him expressing more concern about the fiscal situation that we’re headed into.”
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