But he also noted that “job growth remains considerably more rapid than underlying population growth.” The US also has “huge deficits,” he said, with “more spending to come — substantial investment in renewables, substantial capital costs of various kinds associated with artificial intelligence, an aging population — meaning more dis-savers — [and] less capital flow from abroad.”
Taking it all together, Summers warned that the “neutral rate is way above the 2.5% that the Fed likes to talk about” and that the market may still be overestimating rate cuts this year.
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