萨默斯发表讲话前不久，美联储主席鲍威尔同日宣布，现在是政策调整的时候了，因为现在消费者价格上涨已经降温，通胀上行风险已经减弱，而就业风险已经增加。鲍威尔还承认，2021年春季时关于通胀将是“暂时的”的初步判断，在那年晚些时候被证明是错误的。Former US Treasury Secretary Summers also said that if the Federal Reserve lowered interest rates to the expected level in the market, namely around 3% as indicated by the derivative markets for the next two years, he would be surprised. Summers also pointed out on the same day that he believed another serious mistake the Federal Reserve made was thinking that the neutral interest rate was so low.
On Friday, former US Treasury Secretary Summers, known as the 'whistleblower of high inflation' in the United States, stated that despite the Federal Reserve's failure to take swift action to address the soaring US inflation in 2021, reaching a low point in its monetary policy history, it ultimately made sufficient efforts to correct the economy.
Summers said, 'I must commend the Federal Reserve. Although it is not always obvious, they have taken strong and proactive action to maintain stable inflation expectations. We all make many mistakes. The important thing is to recognize and correct them when you make mistakes.'
Summers made the remarks shortly before Federal Reserve Chairman Powell announced on the same day that it is now time for policy adjustments, as consumer price increases have cooled down, inflation risks have diminished, and employment risks have increased. Powell also admitted that the preliminary judgment in the spring of 2021 that inflation would be 'transitory' was proved wrong later in the year.
Although Summers stated that the Fed's readiness to cut interest rates at the September meeting was the right decision, he also believes that the medium-term outlook for monetary policy needs to be more cautious.
Summers said that he would be surprised if the Fed lowered interest rates to the level expected by the market, namely lowering the benchmark interest rates to around 3% within the next two years, as indicated by the derivative market. The current target range for the federal funds rate is 5.25%-5.5%.
Regarding the estimates of long-term benchmark interest rates by Federal Reserve policymakers, Summers pointed out that their expectations are below 3%, which is still too low. Due to the large US fiscal deficits and strong investments in the green economy and advanced technology, all of these exert pressure on borrowing costs, and the so-called neutral interest rate may be higher than in the past.
Summers bluntly stated, 'I think the Fed made a serious mistake in believing that the neutral interest rate is so low, and therefore misjudged the restrictiveness of any established policy level. If you don't have the right polaris, you cannot navigate accurately.'
