Former US Treasury Secretary Larry Summers expressed his position that the Federal Reserve should not be in a hurry to reduce interest rates, saying that the prospect of the Federal Reserve (Fed) reducing interest rates is ahead of schedule.
In an interview with Bloomberg TV on the 22nd (local time), former Secretary Summers said: “It looks like the Federal Reserve is going to start cutting interest rates, but I don't fully understand (its intentions),” referring to the bottom line. US indicators that remain strong.
“The unemployment rate is lower than the Fed thinks, and inflation is expected to remain above target for the next two years,” Summers said. “Gross domestic product (GDP) growth is growing faster than potential growth and is a common monetary measure. “It is at a very weak level,” he remarked.
Former Secretary Summers' remarks came after the Federal Reserve kept interest rates on hold at the 20th meeting of the Open Market Committee (FOMC) and then hinted at three rate cuts this year in a “dot chart” showing rate forecasts.
Summers said the Fed's new 2.6% “neutral rate” (the rate that can reach potential growth without overheating the economy or causing a recession) is too low and “outlandish.”
Summers said high-risk debt and large deficits are putting pressure on credit markets, and with increased private sector investment and a recent explosion in demand for artificial intelligence (AI) products, policymakers are increasingly looking at current policies as restrictive. diagnosed as impossible.
“With all that stimulus to demand, I don't understand why you think a neutral rate is essentially what we thought it would be four years ago,” he said.
Reporter Soo-jong Lee soojunglee@g-enews.com
(tagsTo Translate)Larry Summers "The Federal Reserve should not rush to cut interest rates"