The former Treasury Secretary told Bloomberg TV that the central bank's interest rate strategy has largely succeeded, even though Fed officials made a major blunder by first underestimating pandemic-era inflation.
In 2021, the Fed mischaracterized inflation as "transitory," citing that COVID supply chain disruptions would eventually blow away.
Once central bankers grew to understand that inflation needed an interest rate response, the Fed initiated the most aggressive policy-tightening campaign in recent history.
In that period, Summers often showcased skepticism that the Fed could clamp down on inflation this way without economic consequences.
AdvertisementNow, the main question is how far interest rates could fall during the Fed's September meeting.
Persons:
—, Larry Summers, Summers, I've, Jerome Powell, Powell
Organizations:
Service, Bloomberg, Business, Fed