Inflation fight: Cathie Wood, Elon Musk push back on Larry Summers

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Ark Invest CEO and CIO Cathie Wood has taken aim at former U.S. Treasury Secretary Larry Summers over his recent comments on inflation.

"Larry Summers seems to be leading the Biden administration astray with his conviction that inflation is intractable, with the ‘70s as his guide," Wood tweeted Saturday. "The ‘70s inflation started in 1964 with the Vietnam War and the Great Society and burgeoned for 15 years."

The Great Society was a series of domestic programs launched by President Lyndon Johnson that included the War on Poverty, Medicare and Medicaid and Head Start.

"This inflation started fewer than two years ago with COVID and supply chain bottlenecks, exacerbated by Russia’s invasion of Ukraine this year," Wood continued. "The Fed is solving supply chain issues by crushing demand and, in my view, unleashing deflation, setting it up for a major pivot."

Tesla CEO Elon Musk, who has previously warned that "a major rate hike from the Federal Reserve risks deflation," replied to Wood's tweet, saying "the fundamental error is reasoning by analogy, rather than first principles."

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On Thursday, Summers told a Harvard University Institute of Politics forum that the Federal Reserve needs to remain "firm and resolute with respect to inflation."

"What that exactly will mean, I don't think is clear down the road. I think it was very clear that doing 75 basis points which is what the Fed has now said it is going to do next week is better than doing only 50 basis points," he explained. "I’m sure they're going to have to continue to raise interest rates."

In an interview with Bloomberg Television Friday, Summers said he is "aware of no major example in which the central bank reacted with excessive speed to inflation and a large cost was paid."

"We’ve got a substantial underlying inflation problem — that doesn’t come out without very substantial monetary policy adjustment," he added. "And the market is waking up to that fact."

A spokesperson for Larry Summers did not immediately return FOX Business' request for comment on Wood's tweet. 

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The comments come as the central bank kicks off a two-day, policy-setting meeting on interest rates on Tuesday. 

Wall Street is betting that policymakers will approve a third consecutive 75 basis point interest rate hike or potentially go even bigger with a historic 100 basis point increase. The CME FedWatch tool shows about an 80% chance of a 75 basis point rate hike and almost a 20% change of a 100 basis point increase.

The Labor Department reported last week the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 8.3% in August from a year ago. Prices climbed 0.1% in the one-month period from July. 

Fox Business' Megan Henney contributed to this report

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