There was a time when the Federal Reserve was widely viewed throughout the United States as an established and trusted institution. Given the central bank’s role in handling financial markets, currency supply, and interest rates, it maintained a widespread level of credibility.
However, over the past year, some issues with the Federal Reserve have come up. Its decision to increase the interest rate many times over remains criticized by economists who warn this will backfire and prompt a recession.
Other critics warn the central bank waited too late to handle inflation. Some Americans also can’t help but notice the increases in inflation, despite the Federal Reserve having increased interest rates on multiple occasions.
Now, economist Larry Summers is pointing out additional factors that led to the Federal Reserve losing some of its credibility.
Summers on the Federal Reserve
During a recent conversation with Bloomberg News, Summers laid out some of the latest issues with the central bank.
For one thing, it used 2021 to largely direct focus on social justice and the environment amid downplaying the severity of inflation when it could have been tackled.
Summers, who’s worked under multiple US presidents, also explained how the Federal Reserve made “core functioning” mistakes that are now costing Americans.
Later, Summers explained it was a mistake for the Federal Reserve to write off inflation as “transitory,” a claim also echoed by the White House that’s now been proven many times over as false.
More Controversy Surrounding the Central Bank
As inflation gets worse in America, the Federal Reserve’s assertions that higher interest rates will bring down inflation continue to be challenged.
The reality is that when interest rates surge, this increases the money Americans have to spend on car payments, mortgages, and additional loans. At a 9.1% inflation rate, many Americans just don’t have the funds.
Wall Street banks are getting a boost from the Federal Reserve’s efforts to snuff out inflation.
Benefits from this year’s interest-rate hikes were clear as banks started to report second-quarter results this week, posting improvements in lending income https://t.co/ABJZ8zitzc pic.twitter.com/DWkYsN2YRW
— Bloomberg TV (@BloombergTV) July 15, 2022
However, as the average person struggles to make it through the month, reports indicate that big banks are actually benefiting from the Federal Reserve’s interest rate hikes.
These benefits are made clear in recent second-quarter record releases from top banks on Wall Street. Americans, meanwhile, are still waiting to reap benefits from the economy as it stands today.