Summers Says Delta Spread Risks Escalating Inflation Concerns
Former U.S. Treasury Secretary Lawrence Summers said the emergence of the delta variant poses another inflation threat in a U.S. economy that already appears to be overheating.
In an interview with Bloomberg Television’s “Wall Street Week” with David Westin, Summers said that while the recent mutation of the coronavirus could provide a “headwind” for demand, it could also hurt the supply side of the economy. That would threaten to force up prices -- at a time when inflation is already accelerating.
“I don’t see the delta as making me feel better about inflation,” said Summers, a paid contributor to Bloomberg News and a professor at Harvard University. “If anything, it’s maybe making me feel a little worse about inflation.”
Speaking after the Labor Department reported that unemployment dropped to 5.4% in July from 5.9% in June, Summers again said that the economy is expanding quickly and that the Federal Reserve should be moving to reduce its bond-buying program and consider raising interest rates faster than its policy makers currently project.
Some Fed officials, including Chair Jerome Powell, have argued the recent inflation spike will soon pass, although they have begun to signal they may soon announce a tapering of asset purchases.
“When you start with high inflation, you have the unemployment rate fall by half a percent in a month and you’re looking at growth at annual rates of 9% going forward, you should be worried about overheating,” Summers said. “The Fed should be moving with all deliberate speed to tapering. It should be signaling its concern about overheating.”
Failure to control inflation would provoke “very serious political and economic consequences,” he said.
Summers said the economy is “pretty close” to reaching full employment within the next nine months to a year.
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