Former Treasury Secretary Lawrence Summers said he remains worried that policy makers are complacent about inflation and he doubted U.S. consumer prices will return to a 2% pace of increases by the end of this year.
With investors expecting the Federal Reserve to next week signal plans to raise interest rates in March, Summers said that “the gravity of our situation is still understated” and that bottlenecks in China, rising oil costs, more expensive housing, tightening labor markets and low borrowing costs all pointed to continued price pressures.
“While the term ‘transitory’ has left the policy maker discourse, the idea of transitory inflation is still very fixed in their minds,” Summers told Bloomberg Television’s “Wall Street Week” with David Westin. “There’s still a belief that with very limited monetary actions — that have not taken full effect — we will see inflation slow to the 2% range by the end of the year. That certainly could happen, but it wouldn’t be my bet.”