Former U.S. Treasury Secretary: The consequences of the president interfering in monetary policy are serious

Former U.S. Treasury Secretary Lawrence Summers recently said on Bloomberg TV's Wall Street Weekly program that "it's a fool's game to get politicians involved" and "the end result is higher inflation and a weaker economy." Summers warned that any president's influence on U.S. monetary policy making will ultimately hurt the economy. Government officials "always want to print more money, lower interest rates - step on the gas pedal to boost the economy." This pressure raises expectations of inflation and pushes up long-term interest rates. Such actions by government officials will only "increase inflation without substantial growth in output." As for the Fed's current policy decisions, Summers said that given that market volatility and stock market sell-offs have eased since last Monday's turmoil, "based on the current facts," any emergency rate cuts are unnecessary. However, Summers believes that at the September policy meeting, "a 50 basis point rate cut may be appropriate." (Jinshi)