Summers: Fed would need to cut rates to negative 9% to avoid next recession

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Larry Summers, the former US Treasury Secretary, said the implication of a recent Fed paper is that rates would have to be slashed to anywhere from minus 6pc to minus 9pc to extract the US from a deep recession, and that there is no plausible way to mimic such rate cuts with other monetary weapons in the Fed's armoury. "I find the idea that forward guidance and QE could do anything like the work of 600, let alone 900, basis points of rate-cutting close to absurd," he said. The paper argues that the Fed can probably muddle through, so long as it succeeds in pushing interest rates back up to 3pc or so before the next recession hits. Even then it might have to launch a further $4 trillion of QE and stretch its balance sheet to a once unthinkable $8.5 trillion. Full article here: (VIEW LINK)


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