Summers: CBO’s Projection of Inflation into 2023 Is Too Optimistic, ‘They Are the Last Holdout on Team Transitory’

During an interview aired on Friday’s edition of Bloomberg’s “Wall Street Week,” Harvard Professor, economist, Director of the National Economic Council under President Barack Obama, and Treasury Secretary under President Bill Clinton Larry Summers reacted to the Congressional Budget Office’s projection that inflation will be 4.7% in 2022 and 2.7% in 2023 before dropping to 2.3% in 2024 while unemployment remains below 4% is far too optimistic and the agency is “the last holdout on team transitory,” and the projection is “their least plausible one in the 40 years that I’ve been watching.”

Summers stated, “I’ve always thought of the CBO as a bastion of credibility. I’ve watched CBO projections for 40 years. This is their least plausible one in the 40 years that I’ve been watching. To be fair, they have to lock that forecast up months ago, and a lot’s happened that’s been adverse in the last several months. But they are the last holdout on team transitory, on the conviction that somehow we can have the economy overstimulated and still have inflation come way down. Because the supply side is just going to wonderfully materialize. That’s a conceivable outcome. It’s a possible outcome. How they could regard that as the most likely outcome is not something that I can understand.”

He continued, “[W]henever you have a forecast, imagine that it’s way off on the upside, and imagine that it’s way off on the downside, and see if those two things are equally plausible. And I, for one, don’t think that 4% inflation is — I think it’s much, much more plausible than 0% inflation two years from now, and that tells me that 2% inflation isn’t really a best guess.”

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