Summers Says Powell ‘Did What He Needed To Do’ In Jackson Hole
Former U.S. Treasury Secretary Lawrence Summers handed out some rare praise for the Federal Reserve.
(Bloomberg) -- Former US Treasury Secretary Lawrence Summers handed out some rare praise for the Federal Reserve, saying Chair Jerome Powell’s latest pledge to restrain inflation was a “statement of being resolute.”
Shortly after Powell spoke to fellow central bankers at the annual symposium in Jackson Hole, Wyoming, Summers said the policy maker “did what he needed to do” and that it was clear the Fed’s “overwhelming priority” is pulling back inflation from the fastest pace in four decades.
In a brief speech, Powell had signaled the Fed is likely to keep raising interest rates and leave them elevated for a while to stamp out inflation. He said restoring inflation to the 2% target is the central bank’s “overarching focus right now” even though consumers and businesses will feel economic pain.
Summers, a paid contributor to Bloomberg TV and a professor at Harvard University, has repeatedly criticized the Fed for failing to spot the recent surge in inflation and then acting too slowly to tackle it.
“The Fed is positioned as well as it can be -- given the credibility losses and mistakes that there have been -- with these remarks to manage things going forward,” he said.
Summers praised Powell’s acknowledgment that there will be a price to pay for cooling inflation, noting short-term hits to employment and wages were acceptable for ensuring long-term prosperity.
Powell “prioritized inflation, making clear that he recognized that that prioritization would have short-term adverse consequences that wouldn’t be easy,” Summers said.
The former US Treasury chief also said European Central Bank President Christine Lagarde has “a much harder job” than Powell given the euro area’s inflation, energy price shocks and regional political problems.
“It’s going to be a very difficult road for them to walk in Europe,” Summers said. “My suspicion would be that they’re going to have to raise rates more than is currently priced in, but that’s going to come at a time when there’s very substantial recessionary forces.”
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