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Billionaire David Rubenstein says inflation won’t drop significantly until unemployment nearly doubles where it is now



The Federal Reserve has raised interest rates seven times this year in an effort to reduce inflation that hit a four-decade high of 9.1% in June, before falling to 7.1% in November.

While the Fed’s rate hikes appear to be slowing an overheated economy, billionaire David Rubenstein says something else will be needed to really bring down inflation.

“The Fed cannot say publicly what I can say and what others have said, which is that until our unemployment rate is around 6%, we will not be able to reduce inflation significantly. tells,” Rubenstein, co-founder of investment firm The Carlyle Corporationspeak in an interview with LinkedIn was published on Tuesday.

Latest work report released by the US Bureau of Labor Statistics earlier this month showed the unemployment rate unchanged at 3.7% in November, equivalent to six million unemployed. From March to November, the unemployment rate fluctuated between 3.5% and 3.7%.

“Because interest rates are inflated so much, the inevitable result is a slowdown in GDP growth and an increase in unemployment,” said Rubenstein. “I doubt the Fed is determined not to make another mistake on inflation,” referring to the initial description of inflation as “temporary” or temporary.

But he is not the only one to say that unemployment must rise for inflation to fall. Former Treasury Secretary Larry Summers on Wednesday, tweeted that the latest inflation numbers are encouraging, but he remains concerned about “a very tight labor market that is unsustainable.”

This is not the first time for Summers, who said in October that reducing inflation would require a recession that would push the economy up. unemployment rate up to 6%. His comments echoed a speech he gave in June included his prediction for the unemployment rate for the next few years.

“We need 5 years of unemployment above 5% to contain inflation—in other words, we need 2 years of 7.5% unemployment or 5 years of 6% unemployment or one year of unemployment rate. 10% unemployment,” Summers said.

Meanwhile, as the unemployment rate rose to 3.7% in August, economists were delighted-with american bank Analysts called it “good news” in a research note at the time.

And after the most recent rate hike on Wednesday, Bank of America said, “The Fed remains willing to risk a recession in the labor market to reduce inflation and, if anything, the monthly forecasts. 12 indicates that the risk has increased, not decreased. .”

Bank analysts said they expect a recession and a “strong rise” in unemployment next year, without providing further details, while the Fed predicts that unemployment will rise. to 4.6% next year.

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