“I think when inflation is as high as it is now and unemployment is as low as it is now, it’s almost always followed within two years by a recession,” he said. Summers. “I think they’re wrong now if anyone is very confident that we’re going to avoid recession.”
US inflation hit a four-decade high in May, hitting 8.6%. Over the weekend, gasoline prices hit a national average of $5, up about 60 cents from a month ago and two dollars from a year ago.
The Federal Reserve has also indicated that it does not necessarily see a recession on the horizon. In May, Fed Chairman Jerome Powell said there was “a good chance of restoring price stability without a recession, without a severe downturn, without significantly higher unemployment.”
Summers said there was a risk that prices would continue to rise and called the central bank’s forecast of a slowdown in inflation “far too optimistic”. The Fed is due to meet again later this week.
Summers acknowledged there is little the Biden administration can do to lower gas prices, but said inflation can be brought down by cutting fares and passing bipartisan legislation that would increase fuel cuts. Trump-era taxes, tax corporations and reduce prescription drug prices.
“We should be focusing on what’s important, not raising input prices for American growers, so they’re less competitive, which is what a lot of those tariffs are doing,” Summers told Bash. “I argued that we need a much more strategic tariff policy vis-à-vis China that lowers tariffs and therefore prices for American consumers and for producers.”
Even though the reduction in tariffs imposed on China by former President Donald Trump was seen as a way to potentially reduce inflation, the Biden administration has yet to act.
At a press conference last month, President Joe Biden noted that tariffs on imports from China “were imposed by the last administration” and said he was considering lifting them. Yellen also advocated for the lifting of some of the tariffs, warning that the levies are having a negative impact on American consumers and businesses.