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The Nobel Prize-winner, who famously -- and erroneously -- warned in 2016 that the election of Donald Trump as president would plunge the world into recession, said over the weekend that the U.S. central bank lacks the firepower to fight an economic downturn, according to Bloomberg.
Krugman doesn’t see the downturn being as bad as the recession of 2008, but he worries that Washington will find it hard to contain large shocks.
“There seems to be an accumulation of smaller problems and the underlying backdrop is that we have no good policy response,” he said.
The Federal Reserve put a halt to its interest-rate hiking cycle this month as policymakers examined the headwinds the economy is facing.
“We’re clearly in worse shape,” he said, citing lower public debt in 2008 and “lots of room” to lower interest rates back then. “And we came into the last crisis with pretty remarkable leadership,” Krugman told Bloomberg.
Krugman says while the idea of a recession isn’t definite, it is likely.