Obama economist: U.S. will have inflation that hasn't been 'seen in 30 years'

Larry Summers, former director of the National Economic Council under former President Barack Obama and former Treasury Secretary under former President Bill Clinton, is warning it's "quite unlikely" inflation will return to normal anytime soon.

"I think the odds are that we're going to have inflation of a kind we haven't seen in 30 years, until either the Fed takes some significant move with respect to monetary policy, or until there's some kind of accident that disrupts the economic growth we're enjoying," Summers told CNN in an interview.

"I think it's possible but quite unlikely that inflation will recede back to its normal two percent level without some significant change in the path we're now on. I think the Fed has made a significant mistake in the approach that it's taking by doubling down on the massive fiscal stimulus we had at the beginning of the year with really easy monetary policy."

Summers proposed that the Federal Reserve, in response to the inflation, should "stop immediately buying mortgages in the midst of a major housing bubble, that would be helpful.

"I think if they said they were going to stop growing their balance sheet and not reduce their balance sheet but just stop the process of growing it — if they were going to get that done in three months, rather than in eight, that would be helpful. If they signaled that they were on hold towards the possibility of raising rates and that they saw the major problem as being overheating, I think that would be helpful."