Summers: Inflation Won’t Get ‘Close to Target’ without ‘a Period of Very High Turbulence’

During an interview aired on Friday’s broadcast of Bloomberg’s “Wall Street Week,” Harvard Professor, economist, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton Larry Summers argued that inflation will not get to target levels or “close to target levels without introducing some real slack into the economy,” and that introducing this amount of slack into the economy, “means a period of very high turbulence.”

Summers stated, “My view has been that inflation’s not going to come down to target levels or close to target levels without introducing some real slack into the economy, which means a period of very high turbulence. Whether that slack’s going to come because the Fed’s going to have to push interest rates very high or whether that slack’s going to come because of internal forces in the economy, inflation eroding people’s incomes, and so forth. That’s less clear to me. But I don’t think there’s a path to a low-inflation economy without a material period of economic slack. It could happen. But it’s not the dominant probability. What we saw today was a lot of strength, and that suggests more need for interest rate hikes. And that’s what was discounted into the market.”

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