Former U.S. Treasury Secretary Lawrence Summers has expressed concerns over the Federal Reserve’s interest rate hikes and warned of an increased risk of a hard landing for the U.S. economy. According to a Bloomberg report, Summers stated that the U.S. employment situation last month showed that the interest rate hikes had not been effective and had instead exacerbated the risks for a hard landing.
In an interview with Bloomberg Television, Summers mentioned that the risk of a hard landing appeared to be growing as job growth accelerated. He suggested that interest rates may not be as influential as they once were in guiding the U.S. economy. This implies that when the economy requires cooling down, interest rates would have to be more volatile than in the past. Summers also expressed concerns about the ongoing sell-off in the bond market and rising valuations in various markets, including private equity, which he believes are putting the U.S. economy in a vulnerable position.
Summers highlighted that the Federal Reserve’s monetary tightening actions over the past year and a half, which raised interest rates by more than 5 percentage points, did not bring the U.S. unemployment rate within a reasonable range. He argued that this indicated a fundamental shift in the effectiveness of the Fed’s policy.
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