Sumkins criticizes Fed for paying too much attention to social issues

36
2
Sumkins criticizes Fed for paying too much attention to social issues

Former Treasury Secretary Larry Summers criticised Federal Reserve policymakers for paying too much attention to social issues instead of a pandemic-induced inflation surge that has triggered wild increases in many consumer prices.

We have a generation of Central Bankers that define themselves by their wakingness, Summers said Wednesday during a virtual conference organized by the Institute of International Finance. They define themselves by how socially concerned they are. Summers similar the arguments made by Fed officials downplaying inflation concerns to those made by the former Fed Chair Arthur Burns and G. William Miller, who led the U.S. central bank in the 1970 s when the U.S. saw some of the highest inflation rates in decades.

How dangerous is it for Americans to lose control of inflation when it is becoming a mass problem? We ve gone even further to losing it in Europe and I think we are at some risk in Britain. The Fed adopted a new strategy last summer in which it will keep the benchmark federal funds rate near zero, even if inflation rises above the preferred rate, to reach maximum employment. But inflation has been rising faster than inflation in over a decade and it is well above the Fed's preferred target of 2% in the past two months. There are still approximately 7.7 million unemployed Americans.

Currently the central bankers have as much discussion about the economic impact of climate change and how to incorporate this into their work.

Summers' remarks came hours after the Labor Department released a report showing that inflation rose 5.4% in September from where it was one year ago, matching the biggest increase since 2008. Consumer prices meanwhile rose in September by the growth of August by 0.4%.

Some Fed officials acknowledged last month that a spike in consumer prices could last longer than expected and remain elevated in 2022, according to minutes from the central bank's September meeting. Economic projections from the September meeting show that headline inflation expectations for this year are 3.7% almost a full point higher than the May forecast, when Fed officials projected it would hit 3%.

But Summers took aim at the Fed and other central banks for not preparing markets and investors for steps they may need to take to rein in inflation.

If these actions come, they re going to be very painful and very shocking in the financial markets, he said.