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Inflation threat is worse than Larry Summers thinks

Former US Treasury secretary Larry Summers is right about an inflation threat he says is still plaguing the world economy. But his most recent warning is only half the story.

The half on which Summers is focused – the US Federal Reserve – is indeed an important part of the equation, given the vital role that inflation expectations play in investment trends and corporate pricing power where Fed chairman Jerome Powell’s policies are concerned.

“I’m glad that the Fed is not among those who are declaring victory,” Summers told Bloomberg on Friday.

“I don’t think we can yet be confident that we’re not going to see a real acceleration of inflation at some point down the road,” he said shortly after news the US economy added 187,000 jobs in July and unemployment slid to 3.5%.

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