Larry Summers warns history indicates inflation will be slow to fall
History may be 'too optimistic' about challenges of controlling inflation: Summers
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Former Treasury Secretary Larry Summers on Thursday warned that persistently high inflation in the U.S. could take time to stabilize, arguing the "history of developed countries since 1970" is pessimistic about the prospects of quickly wrangling prices under control.
"Almost never does high inflation come down fast. Today's consensus view that inflation will come way down is, as this figure from Jim Reid at Deutsche illustrates, outside the range of normal historical experience," Summers said in a tweet.
Summers, a Harvard University professor who served in both the Clinton and Obama administrations, has repeatedly sounded the alarm over rising inflation and spent much of 2021 arguing that the Biden team, as well as Federal Reserve policymakers, have underestimated the risk of soaring consumer prices.
Given today's economy, he said history "may actually be too optimistic" about the challenges of controlling inflation.
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A shopper looks at organic produce at a supermarket in Montebello, California, on Aug. 23, 2022. (Frederic J. Brown/AFP via Getty Images / Getty Images)
"Populism has never been stronger," he said. "Labor markets are super tight. Government debt ratios are at peak levels. Globalization is certainly no longer spreading and may be receding."
The Labor Department reporter earlier this month that the consumer price index, a broad measure of the price for everyday goods, including gasoline, groceries and rents, rose 0.4% in September from the previous month. Prices climbed 8.2% on an annual basis. Those figures were both higher than expected.
In an even more concerning development that suggests underlying inflationary pressures in the economy remain strong, core prices – which strip out the more volatile measurements of food and energy – climbed 0.6% in September from the previous month. From the same time last year, core prices jumped 6.6%, the fastest since 1982.
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Lawrence Summers takes part in the Globe Summit at the Kennedy School of Government at Harvard University. (Jim Davis/The Boston Globe via Getty Images / Getty Images)
The hotter-than-expected figures seemed to confirm what Summers is saying: Inflation has broadened throughout the economy and will be difficult for the Fed to crush.
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"The composition of the inflation reading is perhaps even more worrisome than the overall number," Seema Shah, the chief global strategist at Principal Asset Management, said at the time. "Increases in shelter and medical care indices, the stickiest segments of the CPI basket, confirm that price pressures are extremely stubborn and will not go down without a Fed fight."