Former US Treasury Secretary Larry Summers is warning of a possible economic collision caused by the Fed’s recent rate hikes. “When your brakes don’t get much traction, two things happen. You can be moving too fast—that’s the inflation pressure—and you can be setting yourself up for some kind of collision or crash down the road,” he said on Friday, referring to the Fed’s questionable attempts to slow down inflation. After a strong retail sales report and unexpected US labor market data, investors are concerned that the Fed will keep raising interest rates. This line of thinking is backed by top Bank of America economist Michael Hartnett. Harnett predicts a “no landing” scenario in which the Fed will raise interest rates higher for longer, followed by a “hard landing” into a recession that will wreak havoc on the stock market later this year.

Business Insider/Zahra Tayeb
Larry Summers warns of an economic ‘collision’ ahead as the Fed’s efforts to dim inflation aren’t working as well as hoped

Former US Treasury Secretary Larry Summers has doubled down on his warning that the US economy is headed for a “collision”, as the Federal Reserve’s efforts to cool inflation aren’t working as well as hoped.

The Harvard University economics professor was asked on a Bloomberg interview Friday whether the central bank needs to rethink its approach to taming the US inflation rate, which is still running far above its target.

“The Fed’s been trying to put the brakes on, and it doesn’t look like the brakes are getting much traction,” Summers said.

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Fox Business/Megan Henney
Bank of America warns ‘no landing’ scenario could clobber stocks later this year

The U.S. economy could be headed for a “no landing” scenario thanks to the hot labor market, but that might not be good news for the stock market, according to Bank of America analysts.

In an analyst note published Friday, Bank of America chief economist Michael Hartnett predicted a “no landing” scenario in the first half of the year, where there is no immediate slowdown in growth but inflation remains above trend. That would likely force the Fed to raise interest rates much higher than previously forecast — and keep them elevated for longer.

“No landing means no Fed pausing,” Hartnett wrote, warning that central bank tightening “always breaks something.” He projected the S&P 500 could tumble nearly 7% by early March as a result.

You can read the full article, here.

AP via PBS/Kevin Freking
Sen. Scott alters policy plan after Democrats say Republicans want to cut Medicare, Social Security

Republican Sen. Rick Scott of Florida has amended his plan to overhaul how the federal government works after Democrats, including President Joe Biden, repeatedly invoked it to accuse Republicans of looking to cut Medicare and Social Security.

Scott unveiled his original plan last year when serving as chair of the campaign committee for Senate Republicans. It called for all federal legislation to sunset in five years, and if a law is worth keeping, Congress can pass it again.

His revised plan specifies exceptions for Social Security, Medicare, national security, veterans benefits, and other essential services. The change comes as Democrats work to drive a wedge between GOP lawmakers and their base of older voters who rely on government programs for income and health insurance.

You can read the full article, here.

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