On Friday’s broadcast of MSNBC’s “Morning Joe,” Steve Rattner, who served as counselor to the Treasury Secretary in the Obama administration, said that the Federal Reserve will have to raise interest rates “to 5, 6%, maybe higher,” to get inflation to its target level and “That is a trick the Fed has never accomplished without there being a recession.”
Rattner stated, “It’s a very unusual period. We’ve not really come out of a pandemic. We’ve not had as much excess savings as we still do have on consumer balance sheets at a time when we’ve also had this much inflation. The bounce you see in the stocks for today is because China actually had a good night last night. They’re finally, I think, getting their act together. The question is whether we have our act together. Inflation, as I said, is taking a toll on consumers. Mortgage rates are well over 5%. Gasoline prices, you’ve just reported on, are at a recent record high. And so, I am on the more pessimistic end of the spectrum in terms of how I think the economy’s going to perform. I think inflation is going to force the Fed to raise interest rates, certainly to 5, 6%, maybe higher, Mika, as you suggested, in order to get inflation back to 2%. That is a trick the Fed has never accomplished without there being a recession. And, as you said, you’re starting to see consumers pull back. You’re starting to see somewhat weaker earnings. I’m not predicting the end of the world or an immediate recession, but the road ahead does not look great.”
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