“My best guess would be that we’re going to need more interest-rate increasing” by the Fed, Summers said on Bloomberg Television’s Wall Street Week with David Westin. There’s not much economic slowing “in the pipeline” at this point, with some estimates suggesting a growth rate in excess of 5% this quarter, he said.
While not explicitly recognizing the neutral rate is higher, Powell “noted that growth was much faster than many people expected, given how high interest rates have been pushed,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV. “I think it will reinforce the growing sense in markets” that the Fed is now regaining its inflation-fighting credibility, he said.
Summers also said he would have preferred to see Powell do more to recognize the implications of “the nation’s problematic fiscal posture” for monetary policy.