Larry Summers, Janet Yellen clash over inflation fears
Summers served as treasury secretary under Bill Clinton
Former Obama administration economic adviser Larry Summers fired back at Treasury Secretary Janet Yellen on Monday after she argued he was "wrong" to suggest the country faced a risk of out-of-control inflation.
Summers, who served as treasury secretary under former President Bill Clinton, detailed his concerns about inflation in a lengthy Twitter thread. The prominent economist said he thought there was "less than a 50/50 chance" that Yellen was correct in her assertion that inflation levels will return to normal by next year.
"I actually believe the gap between Treasury & Fed statements and the everyday experience of businesses and consumers in terms of inflation has widened in recent months," Summers said. "Until the Fed & Treasury fully recognize the inflation reality, they are unlikely to deal with it successfully."
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Inflation surged 5.4% in September compared to the same month one year ago, matching the highest rate in 13 years, amid supply chain issues and an ongoing labor shortage. Summers has argued U.S. economic officials are in danger of losing control of the situation without a measured response.
Summers detailed his view that key economic measures indicated that "housing inflation is almost certain to soar in coming months."
"With super tight labor markets, rising strike activity and real wages having declined, increases in wage inflation are likely as well," he added.
Summers’ response came one day after Yellen downplayed concerns about rising inflation during an appearance on CNN. When host Jake Tapper played a clip of Summers warning the country could lose control of inflation, Yellen responded that she felt he was "wrong."
"I don’t think we’re about to lose control of inflation," Yellen said. "I agree, of course, we are going through a period of inflation that's higher than Americans have seen in a long time, and it's something that's obviously a concern and worrying them, but we haven't lost control. As we make further progress on the pandemic, I expect these bottlenecks to subside."
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Yellen added that she expected the U.S. economy to return to the 2% inflation range, which the Federal Reserve classifies as "acceptable," by next year.