Summers Sees Turbulence Ahead With Market Complacent on Inflation

Former Treasury Secretary Lawrence Summers warned that complacency is setting into financial markets about inflation, and that the Federal Reserve may need to tighten further than what investors are currently expecting.

“We’re headed into what’s likely to be a turbulent period,” Summers told Bloomberg Television’s “Wall Street Week” with David Westin. “I’m not sure we’re on a trajectory that’s going to get us to 2% inflation without more interest-rate increases than the market is now anticipating.”

Summers cautioned that a number of factors that had been helping pull inflation down may reverse. One sign of that dynamic came from used-car prices, which climbed 2.5% last month — the most since the end of 2021, according to an industry report on Tuesday. Gasoline prices have also risen this year.

“There are a variety of bounce-back factors that we’re going to have,” said Summers, a Harvard University professor and paid contributor to Bloomberg Television. For overall inflation, “the gains in terms of further reduction are going to come hard” going forward, he said.