(Bloomberg) — Former U.S. Treasury Secretary Lawrence Summers said inflation is accelerating even faster than he forecast, posing a challenge to the benign outlooks of the Federal Reserve and the White House.
“I was on the worried side about inflation and it’s all moved much faster, much sooner than I had predicted,” Summers said in an interview with David Westin on Bloomberg Television’s “Wall Street Week.” “That has to make us nervous going forward.”
U.S. consumer prices rose in April by the most since 2009, a jump that was the biggest upside forecasting miss in records dating back to 1996. Summers, a paid contributor to Bloomberg, has repeatedly warned that inflation would prove stronger than many anticipated.
He noted that the gauge excluding food and energy prices, the so-called core rate, was running faster than the headline measure, and that rising costs for housing, medical services and labor would also add to the pressures building in the economy.
Fed and Biden administration officials have argued the faster inflation will prove transitory and so is no obstacle to the easy monetary and fiscal policies they are pursuing.
But Summers said the 0.9% jump in the core measure in April left room for temporary price increases and “for us still to have an extremely serious problem of inflation rising to the 4% range. I don’t think you can dismiss these figures.”
“The Fed seems to be planning for a very benign scenario that we certainly can’t count on,” he said.
For the Democratic Biden administration, Summers cited the elections of Republicans Richard Nixon and Ronald Reagan as reasons to be concerned that voters don’t ultimately like rising inflation eating into their pay packets.
“The better part of wisdom is that there are slippery slopes, and once you start a process of accelerating inflation there are precious few examples of where inflation has been brought back down without very substantial economic disruption and without enormous disruption to financial markets,” he said.
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