Larry Summers Backs Fed Moves, Urges Caution In US Diplomacy: 'Not For Us To Tell China How They Should Organize Their Society'

Zinger Key Points
  • Summers said if the Fed had not been excessively optimistic about inflation, they would have had a little more room to rely on forecasts.
  • Federal Reserve Bank of Boston leader Susan Collins said on Friday the central bank may need to deliver another 75-basis point rate hike.
  • The former Treasury Secretary also asserted that the United States probably needs to be careful about evangelizing its influence.
Larry Summers Backs Fed Moves, Urges Caution In US Diplomacy: 'Not For Us To Tell China How They Should Organize Their Society'

Former Treasury Secretary Lawrence H. Summers believes the U.S. Federal Reserve is on the right path in its fight against inflation. 

What Happened: Summers, in an interaction with Bloomberg TV, said if the central bank had not been excessively optimistic about inflation, they would have had a little more room to rely on forecasts that have not yet proved inflation is going to cool.

“I think the Fed has this in the right place, when it says that they are going to move up somewhat more, and they are going to take stock of the situation and see what the inflation data is saying, and seeing what the inflation forecasts are saying when we get to ... winter, rather spring of next year,” Summers said.

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Hawkish Tone: The expert’s comments come in the wake of Fed officials increasingly coming out with their hawkish commentaries. Federal Reserve Bank of Boston leader Susan Collins said on Friday that the central bank may need to deliver another 75-basis point rate hike as there is little evidence about price pressures waning, according to a Reuters report.

Wall Street has begun to take the Fed talk into consideration, with the rally following the softer October inflation print taking a break over the last few days. The SPDR S&P 500 ETF Trust SPY ended Friday’s session 0.45% higher, while the Vanguard Total Bond Market Index Fund ETF BND lost 0.17%.

"I have to say that if they hadn't made as many mistakes as they did of excessive optimism about inflation, they would probably have a little more room than they do to rely on forecasts that hadn't yet proved out that inflation was going to come down," Summers said.

On China: Summers also asserted that the United States probably needs to be careful about evangelizing its influence and that it's not “really for us to tell China how they should organize their entire society.”

“I think it's for us to stand up for some of our fundamental interests in security and fair economic competition. But to leave it at that point, I think we are going to need to be very careful with respect to our diplomacy,” he said.

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Photo: World Economic Forum via Wikimedia Commons

 

Posted In: ChinaInflationLarry SummersNewsEconomicsFederal Reserve