Fed Should Do Job Without Public Soul Searching, Summers Says

(Bloomberg) --

The noise accompanying the Federal Reserve’s decision this week underscores how it should tone down its public communications and focus on setting monetary policy, according to Lawrence Summers.

The former U.S. Treasury secretary, in an opinion piece for the Washington Post, wrote that the “surrounding cacophony” when the central bank cut interest rates, followed by Fed Chair Jerome Powell’s press conference, “did not inspire confidence in our financial authorities or our economy.”

If the Supreme Court participated in a similar spectacle while doing its business, it would hurt the court’s legitimacy, Summers said.

“The Fed should concentrate on doing its job of managing interest rates and dial back the public-debating society aspect, the public soul-searching about its communications and, especially, its penchant for predicting its next moves in a world where everyone knows it cannot predict the economic future.”

If U.S. President Donald Trump respected the institution’s independence, the outcome would probably be even lower borrowing costs and a stronger economy, Summers added. He said that the Fed, in cutting rates by a quarter-point on Wednesday, acted “appropriately.”

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