Larry Summers Says 50 Basis Point Rate Cut in September Was ‘A Mistake’

By Susanne Barton

October 04, 2024 at 11:28AM EDT

Larry Summers, president emeritus and professor at Harvard University, during a Bloomberg Television interview at the Allen & Co. Media and Technology Conference in Sun Valley, Idaho, US, on Thursday, July 13, 2023. The summit is typically a hotbed for etching out mergers over handshakes, but could take on a much different tone this year against the backdrop of lackluster deal volume, inflation and higher interest rates. (David Paul Morris/Bloomberg)

(Bloomberg) -- Former Treasury Secretary Larry Summers said the Federal Reserve’s decision to cut interest rates last month was a mistake after new data showed that US job growth last month topped all estimates.

“With the benefit of hindsight, the 50 basis point cut in September was a mistake though not one of great consequence,” Summers, a paid contributor to Bloomberg TV, said in a post on X.

Nonfarm payrolls increased 254,000 in September, the most in six months. The unemployment rate fell to 4.1% and hourly earnings increased 4% from a year earlier, according to Bureau of Labor Statistics’ figures released Friday.

“Today’s employment report confirms suspicions that we are in a high neutral rate environment where responsible monetary policy requires caution in rate cutting,” Summers added.

During the Fed’s September meeting, policymakers said they were confident that inflation is under control and shifted their concern to the labor market. The latest jobs data is helping ease some of those worries and has investors betting on a smaller, quarter-point cut at the Fed’s November meeting.