Former Secretary of the Treasury Larry Summers urged central banks to not let up on efforts to fight inflation, saying it would be a “grave error” to relent while at the World Economic Forum (WEF) Friday.
“I think it would be a grave error for central banks to revise their 2% inflation targets upwards at this point. I say that as someone who was negative on the idea that the United States should put in place a specific numerical target,” Summers said during a WEF panel in Davos, Switzerland, called “What Next For Monetary Policy.”
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“It seems to me though, that having failed to attain the 2% inflation target, having reemphasized repeatedly the absolute commitment to the 2% inflation target, to then abandon the 2% inflation target would do very substantial damage to credibility,” Summers added.
Summers, who also served as an economic adviser to former President Barack Obama and warned about potential inflation in a Feb. 24, 2021, op-ed in The Washington Post, said that the fight against inflation was crucial.
“I think the world is falling far short of what it should be doing to cushion blows and to cushion necessary adjustments with respect to the developing world,” Summers said. “But I think to suppose that some kind of relenting on an inflation target will be a salvation would be a costly error that would ultimately have adverse effects, as it did in a spectacular way during the 1970s for real economies, and working people everywhere.”
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The Consumer Price Index rose by 6.5% year-over-year in December, according to the Bureau of Labor Statistics.
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