On Wednesday's broadcast of CNN's "OutFront," economist Larry Summers reacted to the Federal Reserve's inflation policy announcements by stating that the Federal Reserve still has "a long way to go" and that combatting the inflation problem is "going to require substantially more than what the Fed held out as a prospect today."
Summers said, "I would look at it that they were behind the curve and that they tried to move to catch up today. The market rendered a verdict. Expected inflation, as judged by the market, went up, not down after their action. That says to me that they've got a long way to go. If you look at it, real interest rates fell by 2 percentage points from the beginning of last year when the unemployment rate was in the 8% range and inflation was in the 2% range, to the beginning of this year, when we had epic job shortages and really high inflation. The least we should be thinking about is reversing that change in real interest rates, and that's going to require substantially more than what the Fed held out as a prospect today."
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