empty
23.08.2022 12:06 PM
Former Treasury Secretary Lawrence Summers urges Fed to tighten further the monetary policy

This image is no longer relevant

Former Treasury Secretary Lawrence Summers urged the Federal Reserve to make it clear that even though it will drive up the unemployment rate, there is a need to tighten monetary policy to curb inflation.

He said he fears that the US central bank will continue to say it could achieve low inflation, low unemployment and a healthy economy, which would not only leave people uncertain about what lies ahead, but also cause damage to the credibility of the Fed. "The reality is that the Fed can't bring inflation down completely without rising unemployment," Summers stated. "They don't want to admit it, but it introduces a certain confusion in all their statements."

Summers has consistently criticized the Fed for predicting that unemployment will rise to just 4.1% by 2024, saying instead that it will likely need to overcome 5% from the 3.5% level seen in July. He also disagreed with Powell's assessment that the Fed's interest rate - from 2.25% to 2.5% today - is a "neutral level" when it does not contain or fuel inflation.

"I hope we get clarity that the policy is not yet restrictive, that it has to be restrictive if we are going to contain inflation, and that we need to accept the consequences of that," Summers said. He added that he hoped "that this message will be conveyed clearly and clearly."

Summers, who also served as director of the White House's National Economic Council, also pointed out that the recovery in financial markets since mid-June is effectively at odds with the Fed's inflation campaign. "They should be concerned that financial conditions are now significantly weaker than they were at the last Fed meeting," he noted. "When financial conditions weaken substantially in the middle of a tightening cycle, that should make the central bank nervous."

These statements did not cause much optimism because headline inflation has shown a decline. The consumer price index was also unchanged in July, while core prices, which exclude food and energy, rose 0.3%.

"I don't see us making any significant progress on core inflation," Summers said, pointing to continued strong wage growth. "We still have major inflation issues ahead."

Andrey Shevchenko,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

USD/JPY. Analysis and Forecast

The USD/JPY pair is holding above the key 144.00 level amid continued weakness in the U.S. dollar. Strong household spending data released today in Japan has strengthened expectations

Irina Yanina 18:12 2025-07-04 UTC+2

NZD/USD. Analysis and Forecast

The NZD/USD currency pair is recovering after bouncing from the 0.6030 level, which marks a weekly low, and is attempting to gain further positive momentum. This suggests a break

Irina Yanina 18:08 2025-07-04 UTC+2

USD/CAD. Analysis and Forecast

On Friday, the USD/CAD pair remains near a three-week low, trading below the key 1.3600 level. The U.S. dollar is struggling to extend its gains following yesterday's stronger-than-expected Nonfarm Payrolls

Irina Yanina 17:59 2025-07-04 UTC+2

The Market Celebrates a Victory

Financial markets responded positively to the release of U.S. employment statistics for June. Payrolls rose by 143,000, exceeding Bloomberg analysts' forecasts. April and May figures were revised upward

Marek Petkovich 10:15 2025-07-04 UTC+2

Next Week May Begin on a Positive Note for the Markets (Possible Resumption of Growth in #SPX and #NDX)

The U.S. labor market data, published by the Department of Labor, instilled cautious optimism among investors, extending the rally in U.S. equity markets, supporting the dollar, and weakening gold prices

Pati Gani 10:09 2025-07-04 UTC+2

The Market is Preparing for Another Shock

Just yesterday, U.S. President Donald Trump announced that his administration would begin sending letters to trade partners on Friday, outlining unilateral tariff rates that, according to him, countries will

Jakub Novak 09:55 2025-07-04 UTC+2

Strong U.S. Employment Report Exceeds All Expectations

The U.S. dollar surged against a range of risk assets as the key figures in June's employment report convinced the Federal Reserve that there is no need to lower interest

Jakub Novak 09:49 2025-07-04 UTC+2

What to Pay Attention to on July 4? A Breakdown of Fundamental Events for Beginners

No macroeconomic reports are scheduled for Friday. As previously mentioned, today is a public holiday in the United States, known as Independence Day. All banks and stock exchanges will

Paolo Greco 07:59 2025-07-04 UTC+2

GBP/USD Overview – July 4: Reeves Cried — Did the Pound Collapse?

The GBP/USD currency pair also traded fairly calmly throughout Thursday until the start of the U.S. trading session. Recall that a day earlier, the British currency had plummeted by nearly

Paolo Greco 03:56 2025-07-04 UTC+2

EUR/USD Overview – July 4: Trump's Third Trade Deal Didn't Help the Dollar Either

The EUR/USD currency pair traded very calmly throughout Thursday, until unemployment and labor market reports were released in the United States. However, we will discuss those reports in other articles

Paolo Greco 03:56 2025-07-04 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.