Former Treasury Secretary Lawrence Summers hammered the Fed’s credibility after the latest inflation numbers came out, demonstrating that clearly no peak in inflation had occurred.

Summers told Bloomberg Television’s Wall Street Week, “It’s pretty clear that peak-inflation theory, like ‘transitory’ theory is kind of wrong. The Fed’s forecasts from March, saying that inflation would be coming down to the 2s by the end of the year was, frankly, delusional when issued, and looks even more ridiculous today.”

Summers spoke after the shocking inflation report came out, showing consumer prices rose 8.6% year over year in May, exceeding all forecasts.

Summers went on, “The Fed is saying the right words, but I think they don’t appreciate the extent to which… those mistakes mean that they don’t fundamentally have credibility”

Summers, a Harvard University professor, said, because it takes so long for Fed Policy to trickle down to market effects, “there’s some real disadvantages to delay.” However he cautioned against any emergency rate hike implemented immediately, saying it might look desperate and panic investors.

The Fed has already indicated there will be half point rate hikes in June and July. Vice Chair Lael Brainard has also voiced skepticism about any pause in rate hikes in September, to assess the effects.

Summers said, “The debate has been between 25 and 50 basis point moves a couple months from now. I think a more fruitful deliberation would be between 50 and 75 basis points.”

Summers also demanded an investigation into how the Fed’s prediction got the inflation numbers so wrong, and criticized the Fed’s main mathematical model, saying it, “is not really fit for purpose in terms of inflation.”

Summers went on to say, “a soft landing’s not going to be easy,” indicating a recession will probably be in the works at some point.

Photo of Lawrence summers courtesy of Wikipedia.