The U.S. slipping into a recession is the “most likely outcome,” says former Federal Reserve chair Alan Greenspan.
Greenspan, who is now the senior economic adviser at Advisors Capital Management, stated in a year-end question-and-answer commentary posted on the firm’s website on Tuesday that even a pivot by the central bank would not be “substantial enough to avoid at least a mild recession.”
Despite the last couple of inflation reports showing a deceleration in the pace of price hikes, Greenspan noted that “it does not change the fact that prices are still increasing.”
“[O]fficial inflation numbers could remain tame in the near term owing solely to the methodology by which they are measured, most notably housing costs,” Greenspan stated. “However, I don’t think it will warrant a Fed reversal that is substantial enough to avoid at least a mild recession. Wage increases, and by extension employment, still need to soften further for a pullback in inflation to be anything more than transitory. So, we may have a brief period of calm on the inflation front, but I think it will be too little too late.”…