Former U.S. Treasury Secretary Lawrence Summers said the latest U.S. inflation data was encouraging and that a recession might occur later than originally thought.
Summers said on 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 great. It looks like it (Referring to the economic recession) has indeed been delayed in time.”
Still, Summers warned that if a recession does come, it might be longer and faster than thought, with policymakers facing a rapidly weakening labor market and a slump in stock markets. situation.
He explained that employers are retaining workers now partly out of fear that they may not be able to fill future manpower vacancies following the outbreak causes labor shortages, but this hoarding of manpower may suddenly change dramatically once the labor market starts to relax .
He also said that when the economy is in recession, weaker corporate earnings will become the focus of stock market investors and have a negative impact on the market. He reiterated that once household savings are depleted, consumer spending might 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 was broadly correct, and he also criticized Jerome Powell’s refusal to change the 2% inflation target and his flexible stance on future policy. The attitude is positive.
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