The next U.S. recession could drag on longer than the last one that stretched 18 months. That’s the assessment of former Treasury Secretary Larry Summers.
With the economy in its ninth year of expansion, even if one were to take a hawkish view of upcoming Federal Reserve tightening, it would be some time before the level of interest rates gets high enough to allow them to again be reduced by the 500 basis points typical for a U.S. recession, Summers said at a conference in Abu Dhabi.
“That suggests that in the next few years a recession will come and we will in a sense have already shot the monetary and fiscal policy cannons, and that suggests the next recession might be more protracted,” he said during a panel with Bloomberg Television’s Erik Schatzker on Feb. 28.
Later in an interview with Bloomberg Television, Summers said the economic situation the new Federal Reserve Chairman Jerome Powell faces is “a difficult balance between the legitimate desire to stimulate the economy and to get as much employment and growth as possible, and certainly to assure that inflation gets back to 2%.”
“At the same time I think he has to worry about the financial foundation for recovery if you’re the Fed chair, so I think there’s a balance to be struck,” Summers said.
With assistance by Lorenzo Totaro, and Kevin Costelloe