Larry Summers Puts 2020 Recession Risk at 50%

Former Treasury chief sees risk from slumping stock market, Fed tightening, and international tensions.

To Harvard economist Summers, who served in the top Treasury job under President Bill Clinton, a growth slowdown is a “near certainty.” In remarks to CNBC, Summers said, “the recession risk is nearly 50% over the next two years, maybe slightly less.”

He pointed to this fall’s withering financial markets, led by tech stocks’ plunge, US-China trade tensions, and the Federal Reserve’s interest rate increases. The Fed, which has hiked its benchmark rate three times already this year, appears to be on course to add a fourth in December—and perhaps as many as three next year.

The ex-Treasury secretary has in the past criticized President Donald Trump’s denunciations of the Fed’s tightening policy. But Summers went on to say that the Fed could over-do its rate hikes and harm economic expansion.

“I think the risks if we have a recession are very, very serious, so they need to bend over backward to avoid that,” he said. 

Gross domestic product growth has picked up this year, with a 4.2% increase in the second quarter and a 3.5% expansion in the third. The Atlanta Fed, though, forecasts slower growth ahead, up just 2.8%—more in keeping with the post-crisis norm.



Tags: , ,