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2022-01-08

Lawrence Summers - challenging for the Fed executing a soft landing

 “The market judgment and Fed’s judgment is that you can somehow contain this inflation without rates ever rising above 2.5% in terms of the fed funds rate.”

“What we’re going to find out is what the vulnerability of the economy is to rate increases,” Summers said. “It may be, as some argue, that because of greater levels of debt, because asset prices are substantially inflated, the economy is more vulnerable than usual to rate increases or to quantitative tightening.”

“The challenge for the Fed is that they’re likely to see some amount of fluctuation in financial markets... before they see the declines in inflation - then they’re going to have a very difficult set of decisions to make,”  

Bloomberg 7 January 2022

https://www.bloomberg.com/news/articles/2022-01-07/summers-says-fed-markets-too-sanguine-on-anti-inflation-steps


Recent stock market turbulence should abate because the US economy remains fundamentally strong President Bush said he believed the markets were set for a "soft landing".

President George W Bush, BBC 9/8 2007


The skeptical among us might note that the Fed’s track record for engineering soft landings is essentially 0 

What happens when they try to end QE and the stock market drops 20 or 30%?

John Mauldin 7 January 2022

https://englundmacro.blogspot.com/2022/01/fed-is-simply-becoming-little-less.html


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