Former Federal Reserve Chairman Ben Bernanke said in an interview on Sunday that he believed the Fed could deal with inflation with a “soft landing” to avoid a recession.
When asked by CNN’s Fareed Zakaria if he agreed with former Treasury Secretary Larry Summers’ assessment that the Fed might induce a recession to fight inflation, Bernanke disagreed.
“I think a recession is possible. Economists are very bad at predicting recessions, but I think the Fed has a good chance, a reasonable chance of achieving what [Jerome] Powell calls for a soft landing, either no recession or a very mild recession to bring inflation down,” he said, referring to the current Fed chairman.
Bernanke was also asked if he thinks the current state of the economy is similar to the stagflation seen in the 1970s and if he feels like the US no longer has any economic tools to solve problems.
“Do you feel like we’re in a situation like this today?” Zakaria asked.
“No, I don’t,” Bernanke said.
“A very fundamental difference is that the inflation of the 70s lasted 13 or 14 years and not six months, so people became very, very accustomed to inflation and a huge psychology of inflation developed “, he continued.
“I think it’s a very different situation. Today we have a Federal Reserve that knows it is responsible for inflation. He will take the lead. He has a lot of credibility. Inflation has been low for 40 years. He has political support,” he added.
Bernanke’s remarks come as inflation has soared in recent months. In May, the annual inflation rate was the fastest annual increase in prices since inflation reached 8.9% per year in December 1981.
“Inflation is not only hitting the volatile categories of food and energy, which themselves seem to persist at high levels, especially food, but it has spread deeply to services and the costs of housing, while remaining elevated in property categories we thought were cooling,” Robert Frick, chief economist at the Navy Federal Credit Union, said in an analysis last week.
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