Larry Summers

Larry Summers, former Treasury Secretary, urges Fed to continue hiking rates

Larry Summers, former US Treasury Secretary, stated Tuesday that the increasing chorus of economists calling for the Federal Reserve’s halt to its aggressive rate increases to combat inflation is misguided. Critics claim that the Fed can cause a recession. Summers, however, said that there is a greater risk that the Fed isn’t doing enough to lower prices.

Summers stated, “I look at economics and I see many times when Fed didn’t do enough so inflation reaccelerated but I can’t locate any times in the past 60 years when Fed did too much.”

He stated that even if there is a recession or downturn, there is no reason to believe that the Fed can push inflation below its stated goal of 2% without taking a lot more actions.

Summers said that interest rates might need to rise to 5.5% “if there’s any chance of restoring inflation at the target level that’s been set by the Fed.” At 3% to 3.75%, the benchmark lending rate for the central bank is currently.

For months, the US economy has been warning of a possible recession. Many economic leaders, including Jamie Dimon, CEO of JPMorgan Chase, and Jeff Bezos founder of Amazon, have expressed concern that a recession could be imminent.

The markets have also fallen sharply this year. Summers believes that there is a significant likelihood of a recession in the next year. He encouraged Americans to be aware that they may face more difficult times.

Summers’ reaction to President Joe Biden’s suggestion of a windfall profit tax for punishing the oil industry because it pays high prices, Summers reacted.

Monday’s comments by Biden were a direct attack on Big Oil’s jaw-dropping profits. He also suggested that tax penalties could be imposed if the oil and gas companies do not invest in new supplies at lower prices.

Record profits are not due to innovative or new activities. Biden spoke from the Roosevelt Room alongside Janet Yellen, Treasury Secretary, and Jennifer Granholm, Energy Secretary. “Enough is enough.”

Summers, a prominent Democratic economist and top advisor to Presidents Bill Clinton, and Barack Obama was sometimes a vocal critic of Biden.

“I believe the fear is that if the price of oil rises significantly, we will impose windfall profits taxes. This would reduce the incentive to drill for oil. He said Tuesday that it would be because you wouldn’t feel like you could get the full benefit of your oil when you needed it.” It would deter investment, which in turn would lead to higher oil prices.

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