The idea of raising rates by 2% to 3% to curb inflation “is really unlikely. I think they’re going to have to raise interest rates to 4% or 5% to bring inflation down to 2.5% or 3%,” the Harvard University professor said in an interview on Bloomberg Television Tuesday with Lisa Abramowicz. , Jonathan Ferro and Tom Keene. “There is a lot of uncertainty. I’m not going to say that I know exactly what to do. But it’s clear that things are out of control.”
It is expected that the president of the Fed Jerome Powell indicate that they are aiming to raise rates about 2.5% by the end of the year. But it’s not clear if that will be enough to control inflation, which is currently triple the Fed’s 2% target.
Rogoff spoke about the “risks of having a perfect storm” of recessions, where European economic growth contracts due to Russia’s war in Ukraine, China’s does the same due to “a failed covid lockdown policy” and the US economy shrinks because the Fed “tighten too much, too fast”.
“If China has a supply-side downturn, which is really what we’re talking about, that will fuel inflation, hurt demand in Europe,” Rogoff said. “I would say the risk has palpably increased, that this could happen,” he said of a US economic contraction that would hit global financial markets.
“Things could turn out for the best, so there’s a lot of uncertainty, but it’s not hard to see all these risks,” he said, adding that China “might already be on the verge of recession.”
Source: Ambito
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