Economy

Former Trump economic adviser tells CNN’s Matt Egan why the Federal Reserve waited too long to hike interest rates and why recession fears are real.

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Former Director of the National Economic Council Gary Cohn

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US singer-songwriter Beyonce performs during the 94th Oscars at the Dolby Theatre in Hollywood, California on March 27, 2022. (Photo by Robyn Beck / AFP) (Photo by ROBYN BECK/AFP via Getty Images)

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Low supply is a core source of the inflation problem, says JoAnne Feeney, Partner and Portfolio Manager at Advisors Capital Management. But raising rates to tackle the issue could pose its own set of problems, she explains.

” data-duration=”03:41″ data-editable=”settings” data-headline=”How raising rates could threaten demand and production” data-index=”idx-2″ data-show-name=”Quest Means Business” data-show-url=”https://www.cnn.com/shows/quest-means-business” data-source=”CNNBusiness” data-uri=”archive.cms.cnn.com/_components/video-resource/instances/h_80183cade3becf4c95ee838db7cea4ef” data-video-id=”business/2022/06/17/fed-rate-hikes-supply-and-demand-economy-investment-manager-qmb-vpx.cnnbusiness” data-video-instance=”archive.cms.cnn.com/_components/video-resource/instances/h_80183cade3becf4c95ee838db7cea4ef”>

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Leaders at the World Economic Forum saw an uncertain “dichotomy” at play, as Russia’s war on Ukraine continues to scramble economic growth.

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The Federal Reserve has raised interest rates by three-quarters of a percentage point to help tame inflation, and Fed Chairman Jerome Powell says more hikes are likely. CNN’s Matt Egan reports.

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U.S. Federal Reserve Board Chairman Jerome Powell takes questions after the Federal Reserve raised its target interest rate by three-quarters of a percentage point to stem a disruptive surge in inflation, during a news conference following a two-day meeting of the Federal Open Market Committee (FOMC) in Washington, U.S., June 15, 2022.

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CNN’s Chief Business Correspondent Christine Romans breaks down how higher interest rates will impact your wallet.

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Danielle Hale, Chief economist for Realtor.com, breaks down which regions of the country continue to have the most affordable housing despite record level home sales. Hale also shares advice for homebuyers and sellers in the current market.

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A For Sale sign is displayed in front of a house in Washington, DC, on March 14, 2022.

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Former US Treasury Secretary Larry Summers, who faced criticism from the Biden administration in 2021 for saying inflation would rise in the US, predicts that the US will likely see a recession in the next two years because of an “overheated” economy and says he expects interest rates will continue to rise.

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As more interest rate hikes are expected amid inflation, Moody’s Analytics Chief Economist Mark Zandi predicts how long a recession may last, if it occurs, and how it could impact unemployment.

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Former labor secretary Robert Reich explains what the Biden administration could do to address rising inflation and soaring energy costs.

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Couponing is on the rise as record-high inflation has led to tightening of household budgets nationwide. CNN’s Evan McMorris-Santoro reports.

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Record gas prices drove inflation to 8.6% for 12 months ending in May, higher than the pace in April, according to the latest Consumer Price Index. CNN’s Christine Romans reports.

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Inflation is outpacing the cost of living for millions of seniors as food, gas, rent and healthcare costs rise. Some face the depletion of retirement funds while others are being pushed towards homelessness. CNN’s Gabe Cohen reports.

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New York CNN Business  — 

Corporate America is frustrated with the Federal Reserve for waiting too long to attack inflation, according to former Trump economic adviser Gary Cohn.

Cohn, who is frequently in touch with CEOs, told CNN that businesses have been experiencing wage inflation and surging input costs for more than a year.

“I think the business community is disappointed in the Fed having taken as long as they did to come to the reality of what the business community saw,” he said.

Cohn, a former Wall Street executive who is now vice chairman of IBM (IBM), said the Fed was “late” to raising interest rates and criticized the central bank for continuing its bond-buying stimulus program “deep into this inflationary cycle.”

“They were behind the curve,” said Cohn, who served as the director of the National Economic Council from 2017 until 2018.

Fed officials initially shrugged off inflation last year as “transitory,” before eventually acknowledging a more persistent and pervasive problem.

“The business community has been seeing real inflation for a long period of time,” said Cohn, who was a top executive at Goldman Sachs before joining the Trump White House. “And I don’t think the business community ever thought it was transitory. I think they thought it was real. And they did not think this was going away anytime soon.”

Now, the Fed is playing catch-up. Fed officials last week announced the biggest interest rate hike since 1994, raising the specter of surging borrowing costs on everything from mortgages and car loans to credit cards.

Asked if Chairman Jerome Powell is still the right man to lead the Fed, Cohn offered little support.

“Look, he is the chairman of the Fed,” said Cohn, who in 2017 was himself a candidate for the position before Trump tapped Powell. “He’s doing his job. You could argue that you disagree with what he did. I disagree with what he did. I think they were late to the game and raising rates. But he is the chairman.”

Cohn noted that Powell is hardly the first Fed chair to face criticism for either keeping rates too low for too long, or failing to cut them fast enough.

Of course, inflation has been aggravated by Russia’s invasion of Ukraine. The war has driven up prices on food, energy and other materials.

“We clearly had inflationary pressures last year pre-war, but the war in Ukraine has clearly accelerated it,” Cohn said.

The Fed declined to comment Tuesday. But at the Wall Street Journal’s Future of Everything Festival last May, Powell said the Fed makes decisions in real-time.

“If you replay last summer, we had a real spike in inflation that began in March, April, May, June of last year, and then inflation came down month after month after month… through the end of the summer,” he said. “So, we were concerned because we saw inflation spreading more broadly, and because we didn’t see supply chain issues improving… We had real concerns.”