Larry Summers Highlights Recession Risk For 2023: 'What Samuel Johnson Said Of Second Marriage Is Often True Of Soft Landings'

Former Treasury Secretary Larry Summers said although the economy looks in better shape at present, the greater risk is that it will head towards recession at some point during 2023 — and inflation may still be too high for many people.

What Happened: “The economy is in OK shape right now, but I think we are going to have a lot of challenges ahead in 2023," Summers told MSNBC on Friday.

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"We brought inflation too high, we can all hope for a soft landing, and the Fed is doing its best. But what Samuel Johnson said of second marriage is often true of soft landings — they represent the triumph of hope over experience. We can hope for a soft landing and it could happen. But I think it's not the largest probability,” Summers added.

Persistent rate hikes by the Federal Reserve have dented financial markets this year.

The SPDR S&P 500 ETF Trust SPY has lost over 19% this year while the Vanguard Total Bond Market Index Fund ETF BND shed over 13%.

Summers On Recession: When asked why he thinks a recession is coming, Summers highlighted many indicators that point toward the possibility.

When you “look at what happens historically when the Federal Reserve raises interest rates” as much as it has; how savings that people built up after COVID-19 are being “depleted”; and some “tendencies” that seem to be present “in terms of some excess inventories that firms have which will cause them to reduce orders,” all suggest there are significant recession risks, Summers said.

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