Former US Secretary of the Treasury Lawrence Summers (Lawrence Summers) said on Friday (3rd) that the Fed Chairman Jerome Powell’s attitude towards inflation this week has changed beyond market expectations, and he should respond to the announcement that interest rates may rise next year. Signal to restore the central bank’s lost trust in the fight against inflation.
Summers said: “If I were in the role of chairman, I would signal four interest rate hikes next year. The release of this news is bound to shake the market again, but this is a necessary move to restore the trust of the central bank. “
Summers said that the key to the employment data released on Friday is that the unemployment rate has fallen from 4.6% to 4.2%, and that the influx of Americans into the labor market in November has strengthened the job market, which means that the current stage is closer to the overheating of the economy. Although this is beneficial to disadvantaged workers, it also increases the risk of inflation.
Bauer said this week that the Federal Reserve will begin to discuss the early withdrawal of asset purchase plans. It was previously estimated that the policy will be withdrawn by mid-2022, and that the discussion of temporary inflation should be abandoned, which means the Federal Reserve may advance ahead of schedule. Information, although Ball did not provide specific information.
Summers said that the Fed does not need to announce exactly four interest rate hikes in 2022. At least it will release its attitude to raise interest rates to show the society the bank’s determination to curb inflation. Another option may be to have to raise interest rates significantly in 2023.
However, Summers said that compared with eight rate hikes in one go in 2023, raising interest rates four times next year is less likely to cause the economy to fall into recession. The lesson from the 1960s and 1970s is that once the Federal Reserve will lose market trust, More actions must be taken to restore trust.
Given the level of inflation, Summers believes that the market underestimates the extent to which the Federal Reserve will raise interest rates. If you look back at each cycle since the 1950s, the benchmark interest rate has never peaked below 2.5%. As inflation exceeds 5%, 2.5% The level may be too low, the market has not yet set a price for it, and the Fed still has a long way to go in releasing its anti-inflation determination.
