Larry Summers Warns of Risks of Sudden US Economic Downturn, High Inflation

Former Treasury Secretary Larry Summers warned of the risks of a sudden downturn in the US economy and cautioned that inflation indicators remain “unimaginably high” from two or three years ago, making getting the rest of the way back to the Federal Reserve’s 2% target “quite difficult.”[0]

“The hard thing to judge is whether inflation is on a strong enough downward trajectory to get to the 2% target, and whether, if inflation comes down, it will stay down,” he said in a Friday interview with Bloomberg.

The Fed has now raised rates by 450 basis points in an attempt to bring inflation back to its target, but Summers warned that the economy could face a “Wile E. Coyote moment” if consumers spend down their pandemic savings, businesses cut costs, and “geopolitical uncertainty” rises.

He compared inflation to a half-way healed “infection” that could return, in a harder fight for the Fed if not properly treated.[1]

“I’m not sure we’re on a trajectory that’s going to get us to 2% inflation without more interest-rate increases than the market is now anticipating,” he said.[2]

Even though there have been a lot of job losses reported from big tech, media and financial businesses in the past few weeks, the US job market remains strong despite the 8 interest rate increases in 11 months that were meant to slow down the economy.[3]

Fed Chair Jerome Powell said last week that the latest data is indicative of “disinflation” in some key segments of the economy.[4] But Summers said that getting inflation all the way back to the 2% target remains a challenge.

“It’s easier to move the ball down the field at midfield than it is when you’re in the red zone,” he said.[5] “And we’re getting closer to the red zone with respect to inflation.[6]

0. “Summers Sees Risk of ‘Sudden Stop’ in Economy After Jobs Surge” Bloomberg, 3 Feb. 2023,

1. “Former Treasury Secretary Larry Summers compares falling inflation to a half-way healed ‘infection’ that could” Business Insider India, 9 Feb. 2023,

2. “Economist Larry Summers compares the Fed’s inflation fight to taking a medicine for an ‘infection’—and says the ‘risks are very large’ that the economy tips into a recession” Fortune, 9 Feb. 2023,

3. “Weekly jobless claims edged up last week, but the labor market remains robust”, 5 Feb. 2023,

4. “Larry Summers says the economy could be headed towards a ‘Wile E. Coyote moment’” Fortune, 9 Feb. 2023,

5. “Larry Summers warns now is not the time for investor ‘euphoria’—markets are headed for a ‘turbulent period’” Yahoo! Voices, 13 Feb. 2023,

6. “Ahead of Tuesday’s CPI Data, Larry Summers Warns Further Inflation Reduction Will Be Harder: ‘We’re Getti” Benzinga, 11 Feb. 2023,