(Bloomberg) -- Former Treasury Secretary Lawrence Summers and billionaire investor Ray Dalio said the U.S. is headed for a period of overheating and inflation that could threaten the economic recovery, even as the Federal Reserve signaled it would step in before that happened.

“It’s easy to say that the Fed should tighten, and I think that they should,” said Dalio, the founder of Bridgewater Associates, the world’s biggest hedge fund. “But I think you’ll see a very sensitive market, and a very sensitive economy because the duration of assets has gone very very long,” he said.

Dalio spoke in a conversation with Summers at the Qatar Economic Forum Monday.

“Much of the consensus of professional forecasters in February was that we would have inflation just above 2% this year,” Summers said. “We’ve already had more inflation than that in the first five months of the year.”

That suggests “to me that people should not just modify their forecasts but should think about what their errors of thinking were that led them to be so far off in their forecasts,” he said.

The Bloomberg Dollar Spot Index fell to a session low at 9:20 a.m. in New York as Dalio and Summers spoke.

Summers has previously said he sees the Fed in a “different place” on inflation than before -- that it now acknowledges the threat of an inflation outbreak.

Fed officials last week accelerated their expected pace of monetary policy tightening, raised their inflation estimates for the next three years, and have started to discuss when and how to pare the bond-buying program.

The meeting was the beginning of the Fed recognizing that inflation overheating is an issue it will need to deal with going forward, Summers said last week.

Summers is also a professor at Harvard University and a paid contributor to Bloomberg.

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