<\/p>\n
Larry Summers<\/p>\n
(Bloomberg) — Former Treasury Secretary Lawrence Summers said Federal Reserve policy is leaning toward being too slack, emphasizing that the US economy\u2019s biggest risks lie in inflation rather than the job market.<\/p>\n
Most Read from Bloomberg<\/p>\n
\u201cMy own guess is that policy is currently a little looser \u2014 looking at all financial conditions \u2014 than people view it as being,\u201d Summers said on Bloomberg Television\u2019s with David Westin. \u201cThe balance of risks is a bit more tilted towards inflation rather than unemployment.\u201d<\/p>\n
WATCH: Summers says Fed monetary policy is \u201con the loose side.\u201dSource: Bloomberg <\/p>\n
Summers spoke after Fed policymakers cut their benchmark interest rate for the first time in a year. Jerome Powell, the central bank\u2019s chair, said the decision reflected a shift in the balance of risks, with \u201cthe much lower level of job creation and other evidence of softening in the labor market\u201d apparent in data in recent weeks.<\/p>\n
\u201cThe biggest risk in this situation is being that we lose contact with our 2% inflation target and become a country with an inflation psychology,\u201d said Summers, a Harvard University professor and paid contributor to Bloomberg TV.<\/p>\n
\u201cI think we\u2019re a bit on the loose side with respect to monetary policy and monetary policy signaling,\u201d Summers said. \u201cBut that\u2019s very much a difference of degree.\u201d<\/p>\n
Fed governors and reserve bank presidents, in updated projections released Wednesday, boosted their inflation forecast for next year. The median estimate shows a 3% increase in the Fed\u2019s preferred gauge, the Personal Consumption Expenditures price measure, for 2025, and a 2.6% rise next year \u2014 higher than the 2.4% predicted in June.<\/p>\n
\u201cIf I were sitting in Chair Powell\u2019s shoes, my greatest concern would be very much\u201d on the inflation side, Summers said.<\/p>\n
The pressure from President Donald Trump and his allies on the Fed to slash interest rates underscores the need to retain credibility on fighting inflation, the former Treasury chief added.<\/p>\n
\u201cI don\u2019t think they\u2019re doing it based on political pressure,\u201d Summers said of the Wednesday rate reduction. \u201cBut I think you have to bend over backwards at a moment like this. And I\u2019m not sure they\u2019ve bent over quite as far backwards as I would have liked to see.\u201d<\/p>\n
Summers also criticized Trump\u2019s call this week for moving away from quarterly corporate earnings reports toward a slower tempo that would allow businesses more time for longer-term planning and investments. The president said moving to a six-month reporting schedule \u201cwill save money, and allow managers to focus on properly running their companies.\u201d<\/p>\n
Story Continues <\/p>\n
\u201cIt\u2019s a bad idea whose time should never come,\u201d Summers said. The US has the world\u2019s most successful capital markets, with price to earnings ratios systematically higher than in other countries \u201cbecause of our whole regulatory framework, our reporting framework.\u201d<\/p>\n
Investors \u201cfeel they can be confident\u201d because of the transparency of the US system, Summers said. Companies are already able to raise money for long-term ideas, he also said. Firms without profits and in some cases without cash flows or even business plans are able to fund themselves, he noted.<\/p>\n
The idea of \u201can honest, fair market was to try to reduce the advantage of insiders relative to outsiders,\u201d Summers said. \u201cThis goes in exactly the wrong direction.\u201d<\/p>\n
(Updates with comments on corporate reporting in final four paragraphs.)<\/p>\n
Most Read from Bloomberg Businessweek<\/p>\n
\u00a92025 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"Larry Summers (Bloomberg) — Former Treasury Secretary Lawrence Summers said Federal Reserve policy is leaning toward being too…\n","protected":false},"author":2,"featured_media":153382,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[4536,4537,45,49,48,76334,46,80975,4990],"class_list":{"0":"post-153381","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-bloomberg","9":"tag-bloomberg-television","10":"tag-business","11":"tag-ca","12":"tag-canada","13":"tag-david-westin","14":"tag-economy","15":"tag-larry-summers","16":"tag-monetary-policy"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/153381","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=153381"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/153381\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/153382"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=153381"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=153381"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=153381"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}