Former US Finance Minister Larry Summers believes that the Federal Reserve is not an urgent need to lower interest rates.
In a new Bloomberg interview, Summers says that setting a rate reduction is now similar to ‘playing with fire’.
According to the former finance minister, the Federal Reserve is better to wait a little longer for more economic data to make a better informed decision on the rate of the FED Funds.
Says Summers,
“There are certainly some risks of a decline. There are also some inflationary risks of the rates from general economic strength. And therefore [Fed Chair Jerome Powell] decided not to bind, but to maintain flexibility. I think that was the right way of acting that he could take. If the economy rejects, there is the scope to reduce the rates very quickly. But if inflation is a problem, there is a risk of a loss of credibility. “
During the last meeting of the Federal Open Market Committee (FOMC) at the end of July, the FED decided to keep the benchmarket stable. The next FOMC meeting is planned for 16 to 17 September.
Earlier this month, the most important investment strategist of Charles Schwab, Liz Ann Sonders, said that the Federal Reserve’s decision to keep the rates stable in the midst of pressure of President Donald Trump to reduce one of the reasons why the Bullish markets had remained.
“I think that part of the reason why the market is going well is because the Fed is not cutting. A combination of … because they do not bow to political pressure. And by the way, none of their double mandate suggests that they should cut.”
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