Summers Warns Fed About Acting Too Early

While the Federal Reserve contemplates increasing interest rates, former Clinton Treasury Secretary Larry Summers said Thursday that policymakers should be more concerned about acting too early than acting too late.

“The greater risks are on the side of [economic] slowdown and stagnation, rather than on the side of overheating and inflation,” he told CNBC’s “Squawk Box” in an interview.

The central bank should use inflation as the yardstick on rates, Summers said, adding that hints of price increases may be starting to pop up, but it is nowhere near the pace of being worrisome.

“Pre-emptive wars don’t work, and pre-emptive wars on inflation would be a big mistake,” he said, noting that inflation has been virtually nonexistent. The Fed wants to see the inflation rate increase to 2 percent before considering a rate hike for the first time in nearly a decade.

The minutes from the central bank’s March meeting, released Wednesday, showed policymakers were divided over the timing of rate increases—torn between liftoff in June, September or even waiting until next year.

But since that meeting, the March employment report showed a meager 126,000 nonfarm payrolls added. Expectations had called for nearly double that pace of job growth.

via CNBC

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza