Summers' interest rate comment

Former U.S. Treasury Secretary Lawrence Summers said he expects interest rates to go higher in the short term and taxes to rise significantly in the long term. Former Treasury Secretary Lawrence Summers expects U.S. interest rates to rise in the short term and U.S. taxes to rise significantly in the long term as the world’s largest economy grapples with persistent inflation and soaring government debt. Speaking at the Peterson Institute for International Economics on Tuesday, the Harvard University professor said the U.S. is stuck with a core inflation rate of 4.5% to 5%, more than double the Fed’s 2% target. Summers said that given that past Fed rate hikes and banking stress have put less pressure on the economy than expected, that means the central bank will probably have to raise the federal funds rate further to rein in price pressures. “My guess is that Fed funds will have to get back to 50 basis points or more from where they are,” Summers said. He also said whether that’s a half-point increase or a 25 basis point increase is secondary.