Fmr. Obama Treasury Counselor Rattner: ‘Probably More Than 50%’ Odds of Recession — ‘Painful’ Rate Hikes Are Cost of Overdoing Stimulus

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 while he doesn’t think the economy is in a recession now, the odds are “probably more than 50%, that we have some kind of recession at some point to get inflation under control,” and increasing interest rates will be “painful” “but unfortunately, it’s the price we pay for having been a little bit too exuberant with our stimulus, both from the Fed and from the central government over the course of the pandemic and during the recovery.”

Rattner said, “I do think there is still a very substantial chance, probably more than 50%, that we have some kind of recession at some point to get inflation under control, but it is not where we are today.”

He later added, “We have to be realistic about what’s going to be required to bring down 9.1% inflation. We had 75 basis points, three-quarters of a percentage point, in layman’s terms, increase this week. The market is expecting more increases before it finally tops out. Mortgage rates have gone roughly from 2.75% to 5.5% for a 30-year mortgage. As I said, that has already had an effect on the housing market. You will see other interest rates follow suit. This is sort of economics 101. Higher interest rates mean people borrow less, which means they spend less. It’s painful. It’s not fun for anybody, but unfortunately, it’s the price we pay for having been a little bit too exuberant with our stimulus, both from the Fed and from the central government over the course of the pandemic and during the recovery. And the question is, can we land this plane safely without a recession? That would be — that is not supported by history. History would tell you that we’re not sophisticated enough to land the plane. It would be a bit like a civilian airplane pilot like me trying to land on an aircraft carrier. You might get lucky, but more likely, you’re probably going to have a bit of an unpleasant experience, and I think we have to prepare ourselves for that possibility.”

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