Lawrence Summers Warns Trump’s Push For Deep Fed Rate Cuts Risks ‘Massive Inflation Psychology’

The former Treasury Secretary told Bloomberg that no mainstream economist supports “anything like 1% rates” in the current environment.

Former Treasury Secretary Lawrence Summers on Thursday pushed back against President Donald Trump’s notion of steep rate cuts, warning that it could trigger “massive inflation psychology” despite providing a short-term economic jolt.

“I’m not aware of any economist anywhere near the mainstream who is supporting anything like 1% rates in the current environment,” Summers told Bloomberg. Such a move “might create some temporary boom in the economy, but would do so at the cost of a massive inflation psychology.”

Summers’ comments come on the heels of President Trump calling on Federal Reserve Chair Jerome Powell to lower interest rates by as much as three percentage points, claiming that it could save the government more than $1 trillion every year. 

Most Fed policymakers have echoed Powell’s stance to hold off on reductions in rates for now until they’re better able to judge any inflationary impact from Trump’s tariff hikes.

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