The U.S. economy will end its "free-fall" within a few months as government stimulus and rescue efforts take hold and inventory cycles return to normal, White House economic adviser Lawrence Summers said on Thursday.
But Summers, speaking to the Economic Club of Washington, said it was still unclear how quickly and strongly the economy would turn around.
"I think the sense of a ball falling off the table -- which is what the economy has felt like since the middle of last fall -- I think we can be reasonably confident that that's going to end within the next few months and you will no longer have that sense of free-fall," Summers said.
However, he said the U.S. unemployment rate may still rise because unemployment typically lags an economic rebound and needs a growth rate of 2.5 percent to remain stable.
"Even if we got a return to positive growth, an economy that was growing at 1 percent would be an economy with rising unemployment. I don't think we can hold out the prospect we'll stabilize at the current level," he said.
Partway into his talk, two protesters rushed onto the stage and unfurled a pink banner behind Summers emblazoned with the words "We want our $$$$ back!" Summers sat silent until security ushered them out of the hotel ballroom.
Summers said policy-makers needed to be wary of risks for both inflation and deflation, adding that near term-deflation risks were part of the reason for the Obama administration's strong fiscal stimulus efforts and programs to support credit markets.
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