On Thursday’s broadcast of “CNN Newsroom,” Harvard Economics Professor and former Chief Economist at the International Monetary Fund Kenneth Rogoff stated that even if the Federal Reserve is successful in bringing inflation down to 2% in the short run and short-term interest rates fall, “the mortgage rates are going to stay high, and these longer-term rates that are what affect most of us, I don’t think you’re going to see again what you got used to before the pandemic.”
Rogoff said, “I think Chair Powell has just done a fantastic job in bringing inflation down and we haven’t had a recession. … But it’s still very tricky to bring it that last mile down to 2%. They’re worried that, if they sit for too long with a high interest rate, they could get a recession, and, suddenly, he’s not the maestro. And, on the other hand, nobody quite knows what’s going on. I think it’s like a little bit longer concern that affects, not just the overnight interest rate, but mortgage rates and ten-year rates that have inflation built into them. And I think those aren’t going to come down as much, that people will see somewhat higher inflation expectations, higher so-called real interest rates, even allowing for inflation. So, even if they bring inflation in the short run down 2%, and even if they bring interest rates down to — their short-term interest rate down to say, 3.5%, the mortgage rates are going to stay high, and these longer-term rates that are what affect most of us, I don’t think you’re going to see again what you got used to before the pandemic.”
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