It will be the “biggest tragedy” if central banks don’t finish their job on inflation

That central banks do not finish what they have begun to bring inflation back to earth will be the “greatest tragedy” for the global economy, according to former US Treasury Secretary Larry Summers.

Central banks around the world have it Strong monetary tightening Over the past year in an effort to control inflation, with annual increases in consumer prices reaching multi-decade or even record levels in most major economies.

The economists are It turns into cautious optimism Recent data indicated a slowdown in inflation, which could enable policy makers to ease and eventually halt the aggressive cycle of rate hikes.

He speaks on a panel moderated by CNBC at the conclusion World Economic Forum in DavosIn Switzerland, on Friday, Summers said economists and business leaders at the summit were seeing a “joy of relief,” but warned policymakers not to rest on their laurels.

“The hyper-populists lost elections and accepted their defeat, Europe didn’t freeze up, recession didn’t come, China adjusted its policies towards the world and inflation slowed. Those are all positive things and reasons why we feel better than we did a few months before,” Summers told CBC’s Jeff Cutmore. NBC.

“But easing must not become complacency. Inflation is declining, but just as temporary factors drove up inflation earlier, transient factors have contributed to the declines we have seen in inflation, and as with many trips, the part is often The last of the journey is the hardest.”

Although recent data showed signs that inflation is entering a sustainable downward trajectory, it remains well above the targets of most central banks. As such, the policy makers have I maintained a tough tone Despite the perceived economic risks of continued high interest rates.

“The biggest tragedy of this moment would be if central banks moved away from focusing on ensuring price stability prematurely, and we had to fight that battle twice,” Summers said.

He added that he was encouraged by recent comments from Federal Reserve President Jerome Powell W European Central Bank President Christine Lagarde.

“We have to continue, because if inflation is allowed to rise again, it will not only jeopardize price stability, not just the living standards of some low-income people, but it also poses very significant risks to cyclical stability,” he said.

“At the same time, we have to remember both in our own countries and around the world the importance of those who have been left behind and bear the brunt of all these necessary adjustments. This will also be crucial in the years ahead.”

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