During an interview that aired in Friday’s edition of Bloomberg’s “Wall Street Week,” the Harvard professor, economist, director of the National Economic Council under President Barack Obama and Treasury Secretary under President Bill Clinton, Larry Summers, reacted to the Congressional Budget Office’s projection that inflation will be 4.7% in 2022 and 2.7% in 2023 before dropping to 2.3% in 2024 as unemployment remains below 4% is far too optimistic and the agency is “the last holdout on the transient team”, and the projection is “their least plausible in the 40 years I’m watching.
Summers said, “I’ve always viewed the CBO as a bastion of credibility. I watched CBO screenings for 40 years. It’s their least plausible for the 40 years I’ve been watching. To be fair, they must have locked in that forecast months ago, and a lot has happened that has been unfavorable over the past few months. But they are the last to resist the transitional team, convinced that we can somehow have an overstimulated economy and that inflation continues to fall. Because the offer will materialize wonderfully. This is a possible result. It is a possible outcome. I can’t understand how they could consider this the most likely outcome.
He continued, “[W]Whenever you have a forecast, imagine it’s well up and imagine it’s well down, and see if those two things are equally plausible. And I personally don’t think 4% inflation is – I think that’s much, much more plausible than 0% inflation two years from now, and that tells me that 2 % is not really the best estimate.
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