The Federal Reserve could protract any economic slowdown until around 2025, if forced to, in its efforts to tame inflation down to its 2% target level, according to Seth Carpenter, Morgan Stanley’s global chief economist.
Carpenter said Thursday that the US central bank’s pivot towards more gradual tightening could mean it now favors curbing exorbitant prices over a more extended period of time, rather than doing so by triggering a short but dramatic recession.
“They said that they want to tighten policy, to be restrictive so that inflation gets back to target, but then they said ‘over time’ and I think it’s fair to ask what does that mean,” he told CNBC’s ‘Halftime Report‘. “The last time they did their projections, ‘over time’ meant at least three years for inflation to get back to their target.”
“They’re serious about bringing inflation down, but I also think they’re trying to be clear that they’re not trying to crash things so that everything comes down next year,” Carpenter added. “They want to squeeze things enough so that we get the slowdown, but then they’re willing to let that slowdown happen over a long period of time.”