Ex-Treasury chief Larry Summers finds the Fed's latest move 'confusing' and 'disturbing' - says the decision likely reflects the central bank's internal politics

• The Fed's move this week appears inconsistent, and may have been influenced by its internal politics, Larry Summers said.
• The Ex-Treasury chief told Bloomberg that he found the central bank's late policy announcement confusing.

The Federal Reserve's move this week to hold interest rates and signal future increases at once reflects an inconsistent approach that may have been influenced by the central bank's internal politics, former Treasury Secretary Larry Summers said.

"This meeting felt like it was driven as much by the internal political dynamics of the Fed, as by any consistent and coherent reading of the economic situation and that was a bit disturbing to me," Summers told Bloomberg on Thursday, following the Fed's FOMC meeting.

The US central bank decided to keep rates steady on Wednesday, taking a breather after 10 consecutive hikes over the past 15 months. But it also projected two more quarter-point increases before the end of the year.

That new approach - dubbed by many in the market as a hawkish pause - doesn't reflect consistent decision-making or a clear approach by the Fed that considers the US economy's current state, according to Summers.

"I found the Fed's action a little bit confusing. I understand the arguments for not hiking this at this meeting. But those arguments wouldn't point towards signaling two further rate increases, they wouldn't point towards significantly revising the forecasts towards a stronger economy and more inflation," he told the outlet.

"I understand the arguments for having gone the other way," Summers continued. "But I don't really understand the internal consistency of an approach of pausing at this meeting, but then signaling two further rate hikes down the road and signaling that they no longer expect unemployment to increase nearly as much as they used to expect it."

The ex-Treasury chief recently said the Fed should consider a major rate hike in July if it pauses this month, and warned that it should be mindful of the US economy overheating. The Fed has raised rates from nearly zero to upwards of 5% since last spring in a bid to tame inflation, which is now cooling from the four-decade highs it hit in 2022.