Former Treasury Secretary Larry Summers warned on Friday that backing down on interest rates as a means of controlling inflation could precipitate a 1970s-style economic crisis.
“I think to suppose that some kind of relenting on an inflation target will be a salvation would be a costly error that would ultimately have adverse efforts, as it did in a spectacular way during the 1970s, for real economies and working people everywhere,” Summers said at a World Economic Forum panel in Davos, Switzerland.
Many have drawn comparisons between the current economic situation and that of the ’70s, when the global economy faced a combination of high inflation and slow growth known as stagflation.
Since the 1990s, the Federal Reserve, the European Central Bank and other central financial institutions have sought to prevent runaway inflation, setting a target inflation rate of 2 percent.
As inflation soared over the last…
