In an interview that aired in Friday’s edition of Bloomberg’s “Wall Street Week,” the economist, Harvard professor, director of the National Economic Council under President Barack Obama and Treasury Secretary under President Bill Clinton, Larry Summers, said recession risks are “skyrocketing”. and it would put the odds of a recession over the next two years at more than two-thirds because there hasn’t been a time in American history when inflation was above 4% with a rate of unemployment below 4% where there was no recession in two years.
Summers said: “I think the risks are increasing. 27.5% this year, because next year is riskier than this year, translates to something closer to two-thirds over a two-year period. And I’d be a little above that, in my opinion. Here’s the key fact: we’ve never had a time in the United States where inflation was above 4 and unemployment was below 4 when we didn’t have a recession two years – within the next two years. So we can remove it. And certainly, it is extremely important that we succeed in achieving this. But the combination of overheating, followed by policy lag, followed by supply shocks means I think it’s a very tough set of challenges, and recession in the next two years is clearly more likely than not. . Some banks are beginning to move in this direction. Your investigation goes in this direction. And I suspect that’s how the consensus will evolve.
Follow Ian Hanchett on Twitter @IanHanchett