Former Treasury Secretary Larry Summers has put the chances of a U.S. recession at 50 percent within the next two years.
The economist told CNBC’s Joumanna Bercetche on Thursday that a slowdown in growth was a “near certainty” before adding “the recession risk is nearly 50 percent over the next two years, maybe slightly less.”
Summers, who served in Bill Clinton’s administration, said while any economy in expansion has a good chance of reversing course, U.S. growth is likely to be checked by unsettled financial markets, geopolitical tension and the Federal Reserve’s tightening cycle.
The economist has previously criticized President Donald Trump for attempting to influence the Fed’s monetary policy. Trump has expressed concern the Fed could choke off growth by raising interest rates too quickly.
Despite disagreeing with statements from Washington, Summers says the Fed should be careful about raising rates too quickly.
“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. He added that the Fed could probably afford to let inflation run hot, given the sub-target rate experienced over the previous decade.
On the potential for a bipartisan deal to build infrastructure in the United States, Summers was enthusiastic.
“It is crazy that a country that can borrow for 30 years at 3 percent in a currency that we print ourselves isn’t repairing its airports, our highways, and isn’t putting in place a modern infrastructure.”
Summers said ideas for infrastructure should come from both Republicans and Democrats but his “best guess” was that divisiveness in Washington would stifle the passage of an infrastructure bill.