(Bloomberg) — Former Treasury Secretary Lawrence Summers praised European Central Bank President Christine Lagarde for raising interest rates by a half percentage point on Thursday and said the Federal Reserve should follow through with its own small move next week.
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“Lagarde got an A-plus today,” said Professor Summers of Harvard University.
Summers said Lagarde not only followed the rate hike because of recent financial-market turmoil, but she delineated monetary policy from financial-stability concerns and made clear that the ECB had the tools to address each. There were different tools for
Speaking at a webinar hosted by Princeton University, he said today he was “very strongly of the view” that the Fed should raise rates by a quarter of a percentage point next week.
While US banks may become less generous in lending to the economy in light of recent troubles in the sector, Summers said he does not think the effect will be large enough to justify a pause in rate hikes by the Fed from an inflation perspective. Will happen. problem has to be faced.
A rate pause could not only raise inflation expectations, it could also increase the odds of a recession by convincing consumers and companies that the economy is worse than they thought, he said.
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