Former US Treasury Secretary: Interest Rate Cuts in Coming Years May Fall Short of Fed Projections
On September 20, former US Treasury Secretary Larry Summers said inflation could limit the Federal Reserve's ability to cut interest rates as much as expected in the coming years. He said, "In terms of monetary policy, the Fed faces the risk of inflation rising if it actually lowers rates as much as it is forecasting."
Fed policymakers projected a median federal funds rate of 3.4% by the end of next year in their latest dot plot, implying potentially 150 basis points more of rate cuts after the 50 basis point reduction announced on Wednesday.
Summers argued that once inflationary pressures reemerge, rates won't drop as much as officials have projected in their dot plot. He cautioned that investors may also be overestimating the Fed's future easing efforts.