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Jason Furman Saw Inflation Coming. Does He Now See Recession Coming Too?

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"Months before much of the economic establishment took the prospect of perilously high inflation seriously, Jason Furman made a prescient warning against overstimulating the economy with too much pandemic aid. Now, with prices rising at the fastest pace in 41 years, the Federal Reserve has raised interest rates by half a percentage point — the largest hike since the turn of the millennium. Furman, a Harvard economist who was a close adviser to Barack Obama, thinks the Fed will have to keep moving quickly in order to get the problem under control, with inflation rising higher than even he thought it would. I spoke with Furman about the Fed’s move, the implications for Democrats this November, and whether a recession is inevitable.

The last time we spoke, about six months ago, inflation was at 5.4 percent. Now it’s 8.5 percent. Briefly, how did we get here?
Inflation has gone higher for two reasons. One is the underlying momentum in the economy and the much stronger labor market, and the second is bad luck related to Putin’s invasion of Ukraine. At this point, the Fed can’t afford to ignore the underlying trend. And it also can’t afford to ignore the bad luck."

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