Summers: ‘Likely’ to Be ‘Somewhat Increased Turbulence’ Due to Rate Hikes Needed to Fight Inflation, ‘Quite Material’ Risk of Disruption

On Thursday’s broadcast of MSNBC’s “Andrea Mitchell Reports,” economist Lawrence Summers stated that he thinks defeating inflation will probably require higher interest rates than foreseen by the Federal Reserve and the market, so “the risks of some form of economic disruption are quite material.” And that we are “likely” to have “a period of somewhat increased turbulence.”

Summers said, “I think we were way behind the curve. I think we stayed way behind the curve even as the inflation figures came in strong in the fall. And in all honesty, while I welcome the Fed’s significant adjustments, I think they are still behind the curve.”

He later added, “I don’t know why people believe that an increase in interest rates to below 2% is going to beat out of the system a once-in-40-year inflation. So, my own instincts are to be quite cautious about the economic prospect going forward. I think we’re likely to require higher interest rates than the Fed now foresees, more than the market now foresees, and I think the risks of some form of economic disruption are quite material.”

Summers concluded, “I was glad to see the movements in what the Fed did yesterday. I look forward to what they’re going to do in March. And, look, you can’t change the past. I do think there were substantial mistakes made in the past. But we just need to do our best going forward, and that is likely to mean a period of somewhat increased turbulence.”

Follow Ian Hanchett on Twitter @IanHanchett

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