On Thursday, former National Economic Council director Larry Summers appeared on MSNBC’s “Andrea Mitchell Reports” and gave warning that a recession is barreling towards the U.S. economy.
“Early last year you’d been warning the fact that inflation, once it hits, is really hard to deal with,” Mitchell began. “So now, with the highest inflation rate in 15 years, how long will it take to bring it down? Do you think they can bring it down by 2024?”
Summers replied, “I think the market is expecting, and I think that the market is probably right that inflation will come down from its current levels. There is still a question of whether it will stay down and how much we have to do to make sure that it stays down, I think it’s still a question. And whether it can be brought down to stay down without a recession is a very large question.”
“My guess is that the Fed will, in the end, half to suffer through a recession if we are going to bring inflation down,” he continued. “Perhaps that was inevitable. Probably that was inevitable given all these stimulus that was provided to the economy in 2021, given that the Fed was late, and very importantly, given all of these supply shocks that the economy suffered. But whereas I had thought that the Fed was very much in the wrong place a year ago, way behind the curve in terms of responding to inflation. I think in very difficult circumstances, they are in the range of having done the right things and pointing towards doing the right things. I think the chairman was right in the film clip. He showed that no one can know what is going to happen going forward.”
Summers added, “My guess is that we will have a recession. That it will not be especially mild as a recession, but there is no reason to think that it will be anything like what happened after COVID, or what happened after the financial crisis, or what happened when Paul Volcker had to slay inflation after much longer period of high inflation at the end of the 1970s. Perhaps the unemployment rate will get in the range of 6%.”