Former U.S. Treasury Secretary Lawrence Summers on Sunday urged the Fed to take off its rose-colored glasses ahead of a meeting of policymakers this week.
“When inflation is as high as it is right now and unemployment is as low as it is right now, it’s almost always followed within two years by recession,” Summers said on CNN’s State of the Union, Bloomberg reported.
Regarding inflation, “the Fed’s forecasts have tended to be much too optimistic there, and I hope they’ll realize fully the gravity of the problem,” he said.
Summers, who has predicted severe inflation since last year, said that a recession will “more likely than not” occur within the next two years, if not this year.
Inflation will be influenced by Russian President Vladimir Putin’s war on Ukraine and the corresponding effects on oil prices, he added.
Summers also blamed Republicans for downplaying the Jan. 6, 2021, Capitol riot, saying that such rhetoric undermines the credibility of the U.S. government and thus “feeds through on inflation.”
“If we can’t trust the country’s government, why should we trust its money?” he said.
The Federal Open Market Committee is set to meet Tuesday and Wednesday of this week. It regularly meets eight times a year, more if needed.
Federal Reserve Chair Ben Bernanke said Sunday that the Fed has a “decent chance” of averting recession and orchestrating a “soft-ish landing” for the economy.
Such a landing, however, would depend on supply-side inflation pressures improving, Bernanke said on CNN’s Fareed Zakaria GPS, Bloomberg reported.
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