Former Treasury Secretary Lawrence Summers warned against complacency from policymakers in bringing inflation down from its peak last year and predicted a further sell-off in bonds as investors adjust to the need for more monetary tightening.
“Nobody ever thought we were an underlying 8 per cent inflation country,” Mr Summers said on Bloomberg Television’s Wall Street Week with David Westin.
“So, the fact that the rate has come down shouldn’t be confused with saying that ‘we can be confident that we’re on a path of this all being OK.’”
Mr Summers spoke hours after Friday’s US jobs report, which he characterised as a “hot” set of numbers, with a payroll gain of 209,000 for June that was effectively double the growth of the adult US population. The release also showed a bigger-than-expected advance in wages, to 4.4 per cent for the year through to June.
Other strong data include a strengthening in the housing market and improving consumer confidence. While some indicators have suggested signs of a softening in the economy, the bond market has sold off in the expectation the Federal Reserve will have to raise interest rates further.
Two-year Treasury yields on Thursday hit their highest level since 2007, surpassing 5 per cent, while five-year yields headed towards the 2007 highs hit in October. Futures prices indicate the Fed will increases rates at least once more this year.
“You’ve seen an appropriate adjustment in medium-term interest rates to this reality” of the Fed’s need to do more, said Mr Summers, a Harvard University professor and paid contributor to Bloomberg TV.
“My best guess is that you’re going to see further adjustment as the data continues to come in.”
Next week, the consumer price index is forecast to show a fall in the headline annual inflation rate, with the Bloomberg survey suggesting a 3.1 per cent pace for June. That would be down from 4 per cent in May and a peak above 9 per cent in June 2022. The core rate, excluding food and energy, is forecast for 5 per cent.
The Fed’s target is for a 2 per cent inflation rate, using a separate gauge known as the PCE price index. In May, that was up 3.8 per cent from a year before, or almost double the policymakers’ goal.
“Since we haven’t yet had a significant slowdown in economic activity, it shouldn’t be surprising that we’ve still got inflation well above target,” Mr Summers said.
As for monetary policy, the best guess has to be that “if the Fed wants to see inflation get back to its target, it’s going to have to raise rates enough that, at some point, the economy suffers a downturn,” he added.
Ahmed Raza
UAE cricket captain
Age: 31
Born: Sharjah
Role: Left-arm spinner
One-day internationals: 31 matches, 35 wickets, average 31.4, economy rate 3.95
T20 internationals: 41 matches, 29 wickets, average 30.3, economy rate 6.28
'Fantastic Beasts: The Secrets of Dumbledore'
Rating: 3/5
Directed by: David Yates
Starring: Mads Mikkelson, Eddie Redmayne, Ezra Miller, Jude Law
The specs
Engine: 4.0-litre V8 twin-turbocharged and three electric motors
Power: Combined output 920hp
Torque: 730Nm at 4,000-7,000rpm
Transmission: 8-speed dual-clutch automatic
Fuel consumption: 11.2L/100km
On sale: Now, deliveries expected later in 2025
Price: expected to start at Dh1,432,000
BMW M5 specs
Engine: 4.4-litre twin-turbo V-8 petrol enging with additional electric motor
Power: 727hp
Torque: 1,000Nm
Transmission: 8-speed auto
Fuel consumption: 10.6L/100km
On sale: Now
Price: From Dh650,000
Fixtures
Tuesday - 5.15pm: Team Lebanon v Alger Corsaires; 8.30pm: Abu Dhabi Storms v Pharaohs
Wednesday - 5.15pm: Pharaohs v Carthage Eagles; 8.30pm: Alger Corsaires v Abu Dhabi Storms
Thursday - 4.30pm: Team Lebanon v Pharaohs; 7.30pm: Abu Dhabi Storms v Carthage Eagles
Friday - 4.30pm: Pharaohs v Alger Corsaires; 7.30pm: Carthage Eagles v Team Lebanon
Saturday - 4.30pm: Carthage Eagles v Alger Corsaires; 7.30pm: Abu Dhabi Storms v Team Lebanon
Auron Mein Kahan Dum Tha
Starring: Ajay Devgn, Tabu, Shantanu Maheshwari, Jimmy Shergill, Saiee Manjrekar
Director: Neeraj Pandey
Rating: 2.5/5
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
PRISCILLA
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FIGHT CARD
Bantamweight Hamza Bougamza (MAR) v Jalal Al Daaja (JOR)
Catchweight 67kg Mohamed El Mesbahi (MAR) v Fouad Mesdari (ALG)
Lighweight Abdullah Mohammed Ali (UAE) v Abdelhak Amhidra (MAR)
Catchweight 73kg Mostafa Ibrahim Radi (PAL) v Yazid Chouchane (ALG)
Middleweight Yousri Belgaroui (TUN) v Badreddine Diani (MAR)
Catchweight 78kg Rashed Dawood (UAE) v Adnan Bushashy (ALG)
Middleweight Sallaheddine Dekhissi (MAR) v Abdel Emam (EGY)
Catchweight 65kg Rachid Hazoume (MAR) v Yanis Ghemmouri (ALG)
Lighweight Mohammed Yahya (UAE) v Azouz Anwar (EGY)
Catchweight 79kg Omar Hussein (PAL) v Souhil Tahiri (ALG)
Middleweight Tarek Suleiman (SYR) v Laid Zerhouni (ALG)
Fixtures:
Wed Aug 29 – Malaysia v Hong Kong, Nepal v Oman, UAE v Singapore
Thu Aug 30 - UAE v Nepal, Hong Kong v Singapore, Malaysia v Oman
Sat Sep 1 - UAE v Hong Kong, Oman v Singapore, Malaysia v Nepal
Sun Sep 2 – Hong Kong v Oman, Malaysia v UAE, Nepal v Singapore
Tue Sep 4 - Malaysia v Singapore, UAE v Oman, Nepal v Hong Kong
Thu Sep 6 – Final
Read more about the coronavirus
The%20specs
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