Former Treasury Secretary Warns: Political Intervention in Monetary Policy Could Damage the Economy and Boost Inflation
Publication Time:2024-08-12 13:51:06
In a recent Bloomberg TV appearance on The Weekly Wall Street program, former US Treasury Secretary Larry Summers stressed that political intervention in monetary policy is a foolish act. He warned that any influence exerted by the president over US monetary policy would ultimately harm the economy. Summers pointed out that government officials tend to take measures that increase the money supply and lower interest rates to boost economic growth. However, this approach would increase expectations of inflation, leading to higher long-term interest rates. He believes that such actions would only exacerbate inflationary pressures without increasing actual output growth. Regarding the current policy decisions of the Federal Reserve, Summers argues that given the volatility in the markets and the relief following stock market sell-offs, at present, there seems to be no need for an emergency cut in interest rates. However, he suggests considering a 50 basis point cut at the upcoming September policy meeting.
Inflation
Monetary Policy
Impact on the economy
Summers