Former Treasury Secretary Summers: "US Faces Recession Risk Within 1-2 Years"

[Asia Economy New York=Special Correspondent Joselgina] Larry Summers, a Harvard University professor who has been calling for more aggressive monetary tightening to curb soaring inflation, warned that the United States could face a recession within 1 to 2 years.

On the 12th (local time), Professor Summers appeared on CNN and expressed disagreement with Treasury Secretary Janet Yellen's view that there are no signs of a recession. He said, "I definitely think there is a risk of a recession next year," adding, "Considering the point we have reached, it is highly likely that we will face a recession within the next two years."

Professor Summers, who served as Treasury Secretary under the Bill Clinton administration, accurately predicted last year that U.S. inflation would become a bigger problem when Federal Reserve Chairman Jerome Powell underestimated inflation as a temporary phenomenon. In May, the Consumer Price Index (CPI) surged by a staggering 8.6% compared to the same month last year, marking the largest increase since 1981.

On the same day, Professor Summers again voiced concerns about inflation. When asked whether prices could rise further from the current situation, he replied that it depends on the actions of Russian President Vladimir Putin and oil prices. He added, "I do not see a very rapid decline in inflation," pointing out that the Fed's outlook tends to be overly optimistic.

Through a recent paper recalculating past U.S. inflation to reflect modern consumption patterns, he stated, "The current inflation level is much closer to historical peaks than the officially announced figures," and suggested that the current Fed under Chairman Powell should implement aggressive tightening comparable to the Volcker era.

The Fed is scheduled to hold its regular Federal Open Market Committee (FOMC) meeting on June 14-15. With U.S. inflation indicators exceeding expectations ahead of the interest rate decision, there is speculation that the Fed may take a so-called "giant step" by raising rates by 0.75 percentage points at once. Previously, the Fed had signaled a 0.5 percentage point increase in a couple of meetings.

Professor Summers mentioned that geopolitical issues, including the Ukraine crisis, have caused inflationary pressures. He said, "It is hypocritical for people to say that we need to strongly confront the Ukraine crisis while criticizing the government because oil prices are higher than a year ago."

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