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Bill Clinton’s Treasury secretary says he has no idea where inflation will go. ‘Who the hell knows,’ and making predictions is a ‘fool’s game’

September 8, 2022, 8:27 PM UTC
Robert Rubin, co-chairman at the Council of Foreign Relations and former U.S. Treasury Secretary, pictured in 2016
Robert Rubin, pictured in 2016, doesn’t put much stock in inflation predictions.
David Paul Morris—Bloomberg/Getty Images

Betting on inflation’s direction has been a losing battle this year.

From senior government officials walking back their previous comments about inflation being temporary, to prices soaring above predictions, there has been no shortage of incorrect forecasts about inflation. 

But for some, the idea of predicting inflation’s future is a waste of time.

It’s a “fool’s game,” according to Robert Rubin, former U.S. Treasury secretary under Bill Clinton, who spoke at this week’s NYC Summit, an annual gathering on tech and venture capital. When asked on Thursday by former Commerce Secretary Penny Pritzker about where inflation might be headed, Rubin responded bluntly.

“The best answer about inflation is: Who the hell knows?” he said.

What we can predict about inflation

U.S. inflation hit 8.5% last month, a slight cool-off from the previous monthly reading of 9.1% that was assisted by a drop in gasoline prices from early summer highs.

But while the deceleration may be an encouraging sign, Rubin says it’s always difficult to forecast where the economy is going.

“In all the time I’ve been involved in markets, I have learned that trying to make judgments on short- and intermediate-term market conditions is a fool’s game,” he said.

The only thing Americans can count on, Rubin said, is the knowledge that inflation in some form will remain reality for the foreseeable future. 

“I think inflation pressures will remain strong,” he said, adding that a number of important factors—including the fragile state of U.S. relations with China and future fluctuations in oil prices—will play a large role in charting inflation’s path.

But while accurately predicting inflation might be impossible, Rubin gave his own “best guess” on its direction, and what may be in store for the U.S. economy next year.

Rubin said that while core inflation—the measure of inflation that strips away more price-volatile items including food and energy—could begin declining by the middle of next year, inflation in general will “remain a very serious problem” for most people, and that many may be unprepared for how severe or prolonged it is. 

“[Inflation] may be more aggressive than markets are currently expecting it to be,” Rubin said.

Recession warnings

Rubin said that the Federal Reserve—which has for months stuck to an uncompromising policy of interest rate hikes to rein in inflation—was “behind the curve” when prices began rising last year. In those comments, he joined fellow former Treasury Secretary Larry Summers, who was among the first last year to criticize the Fed for not doing enough about inflation early on.

Rubin conceded that the Federal Reserve “did catch up” with the growing inflationary crisis, but suggested it may have been too little, too late, and that an economic downturn may now be inevitable.

Last month, Fed Chair Jerome Powell said the central bank was readying itself to “bring some pain” to the U.S. economy, foreshadowing a probable third consecutive 0.75 percentage point hike to interest rates when Fed officials meet later this month.

The aggressive series of interest rate hikes have led many investors, banks, and economists to predict that a U.S. recession within the next year is inevitable—a view that Rubin shared on Thursday.

“The Fed is going to have to get very aggressive,” he said. “I think by the time we get into the next year, middle to the end of next year, it’s likely we will have a recession.”

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