Yahoo Finance Larry Summers makes the case for no Fed rate hike in 11 tweets
The Federal Reserve will update the world on its plans for monetary policy at 2 p.m. ET.
Economists expect the Fed will keep its benchmark interest rate unchanged at a very low range of 0.25%-0.5%. The last time the Fed adjusted rates was back in December 2015.
In a series of 11 tweets early Wednesday, former Treasury Secretary Lawrence Summers explained why the Fed should not tighten monetary policy with a rate hike today.
Summers, who in 2013 was considered a frontrunner to be chairman of the Fed, reiterated arguments made by many economists: Inflation expectations are falling, the labor market has shown cracks, and uncertainty around the world and in financial markets is elevated. He concluded by saying that tighter monetary policy would likely strengthen the dollar, which makes US goods more expensive to foreign buyers. With anti-globalization, protectionist policies being touted in the presidential campaigns, a stronger dollar would further hurt the standing of US-based multinational corporations.
See all 11 of Summers’ tweets below.
There are many reasons, each of which would be reason enough alone, for the Fed not to raise rates today 1/11
— Lawrence H. Summers (@LHSummers) September 21, 2016
The Fed should not raise rate because total hours worked in US are flat to down over last 6 months 2/11
— Lawrence H. Summers (@LHSummers) September 21, 2016
The Fed should not raise rates because inflation expectations are falling not rising 3/11
— Lawrence H. Summers (@LHSummers) September 21, 2016
The Fed should not raise rates because in the 8 year of recovery it should be targeting inflation above 2% so inflation averages 2%. 4/11
— Lawrence H. Summers (@LHSummers) September 21, 2016
The Fed should not raise rates because it lacks the tools to respond if a downturn comes 5/11
— Lawrence H. Summers (@LHSummers) September 21, 2016
The Fed should not raise rates because it will come as a shock at a fragile moment 6/11
— Lawrence H. Summers (@LHSummers) September 21, 2016
Fed should not raise rates b/ the economy is sign. weaker & inflation expectations weaker than when it erred (judged expost) last Dec. 7/11
— Lawrence H. Summers (@LHSummers) September 21, 2016
Fed should get off the idea credibility requires raising rates now, Dec or at any point b4 inflation expectations are accelerating. 8/11
— Lawrence H. Summers (@LHSummers) September 21, 2016
There are much better ways than rate increases for dealing with any concerns about bubbles 9/11
— Lawrence H. Summers (@LHSummers) September 21, 2016
The Fed should take on board that with the economy so slow over the last 3 quarters rates may not be below neutral now. 10/11
— Lawrence H. Summers (@LHSummers) September 21, 2016
Tightening now will induce artificial dollar strength, which is hardly a good thing given the magnitude of protectionist pressures 11/11
— Lawrence H. Summers (@LHSummers) September 21, 2016
Yahoo Finance will cover the Fed decision live on Wednesday afternoon.
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Sam Ro is managing editor at Yahoo Finance.
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