Harvard Prof., Fmr. IMF Economist Rogoff: Fed Will ‘Leave Inflation Higher for Longer’ Due to Bank Fears
On Wednesday’s broadcast of “PBS NewsHour,” Harvard University Economics Professor and former Chief Economist at the International Monetary Fund Ken Rogoff predicted that the Federal Reserve will “leave inflation higher for longer” due to fear of endangering the banking sector despite assurances “that everything’s really sound.”
Rogoff said, “[I]nflation is still high. It — whatever — people thought it was going to go away, it isn’t. There are lots of different measures of it, but it looks like it’s going to last for quite a while. Even on the most relatively optimistic Fed forecasts, it’s still well above their target at the end of the year. So, they don’t want that. The reason they don’t want that is, if they allow that to happen, interest rates might creep up to take that into account, and that’s really what they want to nip in the bud. But we have this banking crisis.”
He added, “I think what they’re going to do now is fly over the airport. And, by that, I mean leave inflation higher for longer…I think that’s what they’re going to decide to do, because if they raise interest rates as much as they might need to — and they say they might — we might get things worse in the banking sector. And I don’t think they’re ready for that, even though they — we’re being told left and right that everything’s really sound. By the way, deposits are fine. The real question is, are they going to be making loans in the same way? Is it going to be harder to get a mortgage, harder to get a car loan, harder to get a business loan? I think that’s a real concern now.”
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