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Photo illustration: Sarah Grillo/Axios. Photos: Samuel Corum, Thomas Lohnes/Getty Images

Two of the world's foremost central bankers reinforced their positions on the potential for damaging inflation in the wake of the coronavirus pandemic on Wednesday, saying in no uncertain terms that they simply don't see it.

Why it matters: This is exactly what former Treasury Secretary Lawrence Summers warned about in his recent op-ed in the Washington Post, citing the potential for "inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability."

What they're saying: "I don’t think we are worrying about reflation and it’s going to be a while before we worry about inflation," European Central Bank president Christine Lagarde said in a webcast interview. "If you consider how far we are from our goal…we are very far away."

  • "As we look forward, we will probably see an increase in [inflation] readings. That is not going to mean very much. It will not be larger or persistent," Fed chair Jerome Powell said during a separate webcast interview hours later.

What it means: Previous central bank leaders were primordially concerned with the possibility of inflation creeping higher and would raise interest rates at the first sign of price pressures.

  • Having examined more than a decade of stubbornly low inflation, Powell and Lagarde — both central bank heads in their first term who are not trained macroeconomists — are turning their backs on the old way.

What he said: The proposed largess of spending "will be manageable if monetary and fiscal policy can be rapidly adjusted to address the problem," Summers wrote.

  • "But given the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply."

Yes, but: Powell, Lagarde and other central bankers have said that if inflation does arise they have the tools necessary to bring it under control.

Yes, but, but: Given the choice between 1) raising rates to choke off inflation that would send the country into a recession or 2) letting inflation bubble up but keeping rates low to allow asset prices to continue booming and the job market to strengthen, central bankers' comments and actions in recent years have reasonably sowed doubt in critics like Summers that the former path would be pursued over the latter.

The last word: "Stimulus measures of the magnitude contemplated are steps into the unknown," Summers argued.

  • "For credibility, they need to be accompanied by clear statements that the consequences will be monitored closely and, if necessary, there will be the capacity and will to adjust policy quickly."

Go deeper

Feb 11, 2021 - Politics & Policy

Scoop: Biden considering Lisa Cook for open Fed seat

Lisa Cook (center). Public Domain

President Biden is considering nominating Lisa Cook, an economist at Michigan State University, to fill an open seat on the Federal Reserve Board, people familiar with the matter tell Axios.

Why it matters: The appointment would be historic, since Cook would be the first Black woman to join the Fed. It also would reveal the new president's preferences for monetary policy and how he may reconstitute the Fed, including the chairmanship.

14 hours ago - Health

FDA advisory panel recommends Pfizer boosters for those 65 and older

A healthcare worker prepares a dose of the Pfizer-BioNTech Covid-19 vaccine at the Key Biscayne Community Center on Aug. 24, 2021. Photo: Eva Marie Uzcategui/Bloomberg via Getty Images

A key Food and Drug Administration advisory panel on Friday overwhelmingly voted against recommending Pfizer vaccine booster shots for younger Americans, but unanimously recommended approving the third shots for individuals 65 and older, as well as those at high-risk of severe COVID-19.

Why it matters: While the votes are non-binding, and the FDA must still make a final decision, Friday's move pours cold water on the Biden administration's plan to begin administering boosters to most individuals who received the Pfizer vaccine later this month.

14 hours ago - World

France recalls ambassadors from U.S. and Australia over submarine deal

Secretary of State Antony Blinken (L), French Foreign Minister Jean-Yves Le Drian (C), and French ambassador to the U.S. Philippe Etienne. Photo: Nicholas Kamm/AFP via Getty Images

France has taken the extraordinary step of recalling its ambassadors to the U.S. and Australia after both countries blindsided their French allies with a new military pact and submarine contract, the French Foreign Ministry announced on Friday.

The backstory: While sealing an agreement with the U.S. and U.K. to acquire nuclear submarines, Australia ripped up an existing $90 billion submarine deal with France. That led senior French officials to accuse the U.S. of a "stab in the back."