The Harvard University economist said on Friday that the Fed should do something.
The central bank was chided for acting too slowly on inflation by the director of the National Economic Council. He said that 15 months ago the Fed said the rate would be zero in 2023.
Reducing the inflation curve will require more monetary tightening. He said it would be difficult to do what was necessary. There were a lot of instances when policy adjustments to inflation were too late.
The high inflation of the 1970s was the most significant example of those costs.
The Fed raised the interest rate by 25 basis points in March and 50 basis points in May. In June it raised rates by 75 basis points, its biggest increase since 1994 and in July it raised rates by 75 basis points.
The Federal Open Market Committee didn't meet in August but will convene this week to decide its next policy move
The best way to stop economic pain from spreading is to act aggressively on inflation. There is no major example in which the central bank reacted with excessive speed to inflation.
The long-term inflation would be worse if the economy were to go into a recession. The Fed has to be prepared to stay the course in order to minimize the risk of aflationary catastrophe.
The Fed is likely to follow Summers' advice. Powell said last month that the Fed needs to see proof that inflation is under control before it starts to lower interest rates.
Inflation ran at 8.3% in August, up from the previous month's 8.3%.
The latest monthly numbers were not unexpected according to the man. The right reading of the data has been that headline inflation fluctuates, but there is a bigger underlying inflation problem.
He said that controlling the underlying inflation problem will be difficult. The market is waking up to the fact that monetary policy needs to be adjusted.
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