Higher inflation will force consumers to limit their spending by so much that the economy will slump into a recession by the July-September quarter, former Federal Reserve Governor Lawrence Lindsey said.
“Inflation is eating into consumer spending power, they’re going to have to cut back,” he said.
Lindsey said the Fed eventually will have to increase its benchmark interest rate higher than consumer price inflation — now running at an 8% annual rate — in order to get prices in check. At the moment, the Fed’s benchmark interest rate is in a range of 0.25% – 0.5%.
The Labor Department estimates that earnings adjusted for inflation fell by 2.6% over the 12 months ending in February 2022.
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