Former US Treasury Secretary Steven Mnuchin said,Inflation will force the Federal Reserve to tighten monetary policy in the months and years to come, a situation that investors may not be prepared for.
“There is no doubt that the Federal Reserve needs to enter a period of normalization of interest rates and normalization of bond holdings,” Mnuchin said in an interview on Monday.
Mnuchin said he is worried that the recent spike in inflation will continue. He suggests that part of the reason the Federal Reserve is cautious is that the economic model it relies on is difficult to incorporate large-scale fiscal and monetary policy measures that stimulate price movements.
Mnuchin concluded, “I think this is something that needs to be watched very carefully. I really think the market underestimates this risk.”