Former US Treasury Secretary Lawrence Summers said the latest US inflation data was encouraging and a recession could come later than initially expected.
Summers told Bloomberg’s Wall Street Week on Friday (16th): ‘We’re in better shape than I thought, and those numbers (referring to the November consumer price index) are fantastic. economic) has actually been delayed in time.”
However, Summers warned that if a recession were to come, it could be longer and quicker than previously thought, with policymakers facing a rapidly weakening job market and collapsing stock markets.
He explained that employers are holding onto workers now partly out of fear they might not be able to fill future labor vacancies after the epidemic caused labor shortages, but that labor hoarding could suddenly change dramatically once the job market starts to relax.
He also said that when the economy is in a recession, weaker corporate earnings will be the focus of stock market investors and negatively impact the market. He reiterated that once household savings are depleted, consumer spending could plummet like the cartoon character “Wile E. Coyote” off a cliff.
Turning to the Fed’s actions, Summers said the central bank’s policy stance is broadly correct and also criticized Jerome Powell’s refusal to change the 2% inflation target and his flexible stance on future policy.
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