Summers Warns Soft Landing Chances Only 1-in-3, Stocks at Risk

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Former Treasury Secretary Lawrence Summers warned against excessive optimism about the US being able to quell inflation without an economic downturn, and reiterated that the Federal Reserve will likely need to raise interest rates further.

“It’s a very narrow window to achieve that soft landing,” Summers said on Bloomberg Television’s Wall Street Week with David Westin. “There is no sign” at this point that this is a “2% inflation economy,” he said, adding that “the Fed is right to be data dependent” in setting its policy.

“People need to be very careful about declaring victory — to be very careful about some assets, particularly in the stock market,” said Summers, a Harvard University professor and paid contributor to Bloomberg TV. “It may be priced a bit for perfection.” The former Treasury chief also cautioned against thinking that the Fed will automatically need to start lowering rates if inflation comes down. One school of thought has argued that if price gains slow, that will effectively mean a tighter Fed monetary setting, because real interest rates will be higher. That’s “too facile” a claim, he said.

 

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