Former Treasury Secretary Lawrence H. Summers has praised Federal Reserve Chair Jerome Powell for his policy stance stating the apex bank head has framed the issues correctly.
I am not sure of the FOMC statement, which the market read as backing off inflation fighting, but I thought @federalreserve Chairman Powell framed the issues right and pointed towards appropriate policy in his press conference today.
— Lawrence H. Summers (@LHSummers) November 3, 2022
“I am not sure of the FOMC statement, which the market read as backing off inflation fighting, but I thought @federalreserve Chairman Powell framed the issues right and pointed towards appropriate policy in his press conference today,” he tweeted.
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Summers's tweet follows a volatile session on Wall Street where major indices witnessed a see-saw movement as investors and traders digested the Fed’s policy. Although the central bank hiked the rate by 75 basis points, in line with market expectations, while also hinting at smaller hikes going forward, the Fed’s belief that the "ultimate level" of its benchmark policy rate is likely higher than previously estimated took the steam out of the initial rally.
Major Wall Street indices closed over 1.5% lower on Thursday. The SPDR S&P 500 ETF Trust (NYSE:SPY) ended the session 2.51% lower while the Vanguard Total Bond Market Index Fund ETF (NASDAQ:BND) shed 0.16% on Wednesday.
Misguided Advice: Summers has advocated against an early loosening of policy in the Fed’s fight against inflation. On Tuesday, he observed the growing chorus of politicians and economists that the U.S. Federal Reserve should soon pause over fears of recession is “badly misguided” advice.
“As the Fed prepares to meet, there is a growing chorus — both among political figures and economists — that the Fed should pause very soon for fear they will throw the economy into recession, given the lagged response of monetary policy. I believe this advice is badly misguided,” Summers had tweeted.
He asserted that it is usually wiser to worry about things that have happened before, rather than something which has never occurred. “The Fed paused too soon because of recession fears many times between 1966 & 1981. Are there any cases where it kept fighting too long causing an excessive recession?” Summers had said.
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