Summers Warns Markets Are at Risk of a ‘Spontaneous Deflating’
Under Chair Jerome Powell, the Federal Reserve is poised this week to execute a sharp turn toward tighter interest-rate policies with inflation accelerating and unemployment falling faster than expected. On Wednesday, the Fed will likely announce that it will reduce its monthly bond purchases at twice the rate that Powell had outlined just six weeks ago. Just three months ago, the Fed had penciled in barely one rate increase in 2022. The Fed’s hard pivot comes after consumer inflation reached a four-decade high in November, and it reflects a growing recognition among Powell and other policymakers that the economy hasn’t progressed the way they had expected it would just a few months ago.