During an interview with Bloomberg on Friday, Harvard Professor, economist, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton, Larry Summers stated that the jobs report shows that forecasters “are exaggerating the impact and efficacy of monetary policy in slowing the economy down.” And that while transitory inflation factors have fluctuated and caused transitory parts of inflation to go up and then come back down, “the underlying inflation now” is 4.5-5%.
Summers said, [relevant remarks begin around 2:06:00] “I think you have to read this report as strong. I think the forecasting community’s got to do a little soul-searching. They’ve been low on this report for 14 months in a row. That has got to suggest that there’s something about the underlying strength of the economy that they’re missing, or another way to put it is that they are exaggerating the impact and efficacy of monetary policy in slowing the economy down.”
He also stated that “there’s been a bunch of fluctuation in the transitory factors, with the transitory inflation going up and then the transitory inflation going back down. But the underlying inflation now [is] running in the 4.5%-5% range…if you want to get inflation down from that 4.5-5% range, you’re going to have to do things that will have, as a side effect, a much looser labor market.”
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