Famous economist Larry Summers warned Monday on “CNN This Morning” that our red-hot economy might soon come to a crashing halt and fall into a recession.
Summers, a renowned economist who served under the Clinton and Obama administrations, argued to Poppy Harlow that the Federal Reserve’s “push and push” process to lower inflationary prices could eventually result in a recession.
Summers further argued historical precedent indicates the process of bringing down inflation may lead to a recession. He said we could be approaching a “Wile E. Coyote moment,” in which the economy “could hit an air pocket in a few months.”
Former Treasury Secretary @LHSummers tells me he “wouldn’t be amazed” if it the U.S. were to hit 6% inflation. “Hope for the best but plan for the worst, I think is the right advice.” @cnnthismorning pic.twitter.com/3WDyUOyT8u
— Poppy Harlow (@PoppyHarlowCNN) March 6, 2023
The economist previously cast doubt over whether we can have a “soft landing” and evade a recession in a February 2023 interview with Fareed Zakaria.
The @federalreserve right now should have the door wide open to a 50 basis-point move in March. A reasonable assessment of where the Fed is would say that they have not been this far behind the curve for a year or so. @BloombergTV @DavidWestin https://t.co/zM5lnFWbIf @markets
— Lawrence H. Summers (@LHSummers) March 3, 2023
He said hope for a soft landing would be “the triumph of hope over experience, but from time to time hope does triumph over experience.”
It “looks more possible that we’ll have a soft landing than it did a few months ago,” Summers told Zakaria.
Summers acknowledged that while inflation might have cooled since 2022, it is still high compared to years past. He said he sees the progress as encouraging, but that we are not “out of the woods.”
The tradeoffs between delaying a recession to keep unemployment low are very real, Summers added, arguing the benefits that come with low unemployment will not be “permanent” in the economy. However, keeping inflation at current levels would likely be entrenched and therefore difficult to lower, Summers predicted.