Summers: Inflation Still ‘Very Serious’ and Recession Odds Still 75%, ‘Mistake’ to ‘Radically Revise’ Views over July CPI NumbersIan Hanchett 11 Aug 2022
On Wednesday’s broadcast of MSNBC’s “Andrea Mitchell Reports,” Harvard Professor, economist, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton Larry Summers said that the July inflation numbers were “pretty good” but it would be mistaken for anyone to drastically change their view due to the numbers and that the inflation problem is still a “very serious” one, “we’re likely to have some quite turbulent times ahead.” And we still have a 75% chance of a recession in the next two years.
Summers began by saying, “I think this was a pretty good number. We knew gas prices were way down and that that was going to have a large effect on headline. The core number was a bit better than we expected, people expected. That was largely driven by components like hotels, like airlines, like used cars that are volatile month to month, they’re hard to seasonally adjust, especially coming out of the pandemic, and that aren’t so easy to measure.”
He continued, “So, I think it would be a mistake for anyone to radically revise their view of the situation based on these numbers. This report’s a lot like the report in March, which was followed by very discouraging reports afterwards, making the optimists from March look wrong several months later. So, I’m not saying that that’s going to happen again. But I think we just need to maintain a sense of uncertainty and wait for the data as it comes. I still think we have a very serious inflation problem in this country. I don’t think that inflation problem is going to go away of its own volition. And so, I think we’re likely to have some quite turbulent times ahead.”
Host Andrea Mitchell then asked, “And still, the possibility — you told me last time, 75% chance of recession as well?”
Summers responded, “Yeah. I mean, every month where we don’t have one, I suppose it goes down a little bit. But I think if you said, with a horizon of two years, I would say a 75% chance of recession is about right, looking at the fact that the economy has many aspects of overheating, looking at a traditional financial indicator, the fact that long-term bonds have lower interest rates than shorter-term bonds, looking at the tremendous amount of uncertainty that’s expressed by consumers and businesspeople.”
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