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Summers: Perceived oil-stock drop link surprising

Larry Summers, former Obama economic adviser and Clinton Treasury Secretary, told CNBC on Thursday he's been taken aback by the perceived connection between oil price weakness and stock declines.

"I've been a little bit surprised by the pattern in which oil prices have seemed to have been associated with declines in the stock market, even declines in the stock market outside of the energy sector," he said in a "Squawk Box" interview—adding that "on balance" cheaper oil is likely to be beneficial to the U.S. economy.

The U.S. is still, by far, a net-importer of oil, Summers said, so when the price goes down that should be "good in aggregate" and the country should be richer for it. With consumers saving money on gas prices as a result, many of them will have more spending power, he continued, and that should boost economic growth.

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Signs of a strengthening economy have Federal Reserve policymakers signalling an interest rate increase sometime next year. But the central bank kept the phrase "considerable time" in its policy statement while adding the word "patient."

At her news conference Wednesday after the Fed's final meeting the year, chair Janet Yellen reiterated that a rate move would be economic data dependent. But she also said the statement should be interpreted to mean that the Fed is "unlikely to begin the normalization process for at least the next couple of meetings."

Summers said the Fed is wise to be thoughtful because of the "paradox" of a stronger economy and low inflation expectations. "They need to maintain an awareness ... if they were to make a mistake and allow deflation to set in or the economy were to weaken again, we don't have room for a traditional monetary ease. And that's a reason for prudence and caution."

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