Larry Summers says CPI raises chances that Fed’s next move is to hike
Treasury Secretary Lawrence Summers said that the hot US consumer price inflation report for March means that the risk case of the next Federal Reserve move to be an increase must be taken seriously.
“You have to take seriously the possibility that the next rate move will be upwards rather than downwards,” Summers said on Bloomberg Television’s Wall Street Week with David Westin. He indicated that such a likelihood is somewhere in the 15% to 25% range.
Summers spoke after data Wednesday showed both headline and core gauges of consumer prices exceeded economists’ forecasts for March. He highlighted that the so-called supercore services gauge that Fed policymakers have focused on — which strips out food and energy along with shelter costs — accelerated.
“On current facts, a rate cut in June it seems to me would be a dangerous and egregious error comparable to the errors the Fed was making in the summer of 2021,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV. “We do not need rate cuts right now.”
Summers noted that things could still change by June, with the potential for a reversal in economic indicators and a slide in financial markets. The odds still do favor a Fed rate cut this year, “but not as much as is priced into markets,” he said.
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