Former Treasury Secretary Lawrence Summers said that the Federal ReserveFederal Reserve was right in going with a 25 basis-points rate hike and it would have been a panic signal if the central bank decided to pause.
If the Fed had stopped raising interest rates when it clearly had the plan to increase interest rates, I think the risk would have been that it was signaling panic and alarm. If the Fed were so alarmed, the market and everyone else would be as well. I think carrying through was the right thing to do. That was what the market expected the Fed to do, and I think it was appropriate, Summers told CNN.
The former Treasury Secretary believes there are two possible paths going forward.
One is that there is going to be a real durability in these banking problems and the economy is going to turn down. This will be weathered and very contained. And what the Fed is going to need to do going forward is going to depend on which of those paths we end up on, which I don't think anybody can tell, he said.
Summers said he probably would have allowed more room for concern about inflation and left the door open to more rate hikes, given the strength of the recent inflation data than the Fed did in their statement. On being asked about Sen. Elizabeth Warren'sWarren's D-Mass. Summers, who was criticized by Fed Chair Jerome Powell, stated that it was not directly Powell's responsibility to criticize the central bank's oversight of Silicon Valley Bank.
Chairman Powell's biggest mistakes in his most important responsibility were that he didn't recognize the inflation threat soon enough and didn't move strongly enough to counter that threat, he said.
Senator Warren was even less concerned about inflation, and the very progressives were even less concerned with inflation than he was. I think those criticisms are quite unfair. Read Next: JATT Acquisition, Chewy, Chewy, Tesla, Coinbase, and Manchester United: Why These 5 Stocks Are Drawing Investors Attention Today?