Although Larry Summers remains critical of the fed’s initial response to inflation, says they didi the right thing and we may not have a recession.
- Larry summers, who has been critical of the feds slow response to inflation in 2021, talked about Jay Powell’s Jackson Hole speech.
- Said of why the fed delayed responding to inflation in 2021, “I think it’s incredible that in May of 2o21 the fed said that it expected to hold rates at 0% until the summer of 2024. So the misjudgment was pretty egregious.”
- Characterized Powells explanation as the fed is trying to leave the impression that inflation was caused by “surprising” supply shocks. Says the supply shocks were not surprising because 1) it wasn’t surprising because everyone knew that covid was affecting the supply chains. 2) nominal GDP growth averaged 10% in 2021/22 and above 8% in 2021-2023.
- Gives the fed credit for the fact that it moved strongly enough to keep inflation expectations anchored.
- Says it now looks like we may get out of “this costly inflation episode” without a major recession.
