Harvard Professor Rogoff Says Fed Won't Have It Easy Keeping Inflation At 2% In 'Changed World'

Zinger Key Points
  • Rogoff noted he doesn’t expect the apex institution to abandon that target.
  • The Harvard professor also believes interest rates may be headed higher in the times to come.
  • He expects the yield on the 10-year Treasury note to average above 4% for the rest of the decade.

Former International Monetary Fund chief economist and Harvard University professor Kenneth Rogoff reportedly said the Federal Reserve will have trouble limiting inflation at 2% but noted he doesn't expect the apex institution to abandon that target.

"I don't think the Fed is going to have [an] easy time navigating keeping inflation down to 2% in this changed world," he said, according to a Bloomberg report.

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Rogoff also believes interest rates may be headed higher in the times to come and expects the yield on the 10-year Treasury note to average above 4% for the rest of the decade.

"Real interest rates are going to be higher and probably inflation's going to be higher," he said adding that one could certainly see a nominal rate "that could be north of four for the 10-year rate through the decade."

After breaching the 4% mark in early March this year, the 10-year U.S. treasury yield has so far managed to stay below that level.

Fed Policy: Market participants are keenly awaiting the release of inflation data along with the Federal Reserve's policy decision next week.

Wall Street is expected to hang on to every word coming from the central bank for potential clues regarding its future policy path. Equity markets, however, have not shown any signs of panic so far.

According to the CME FedWatch Tool, traders are factoring in a status quo policy in June with an 81.7% probability the central bank will not hike rates this time.

Bond markets, too, have not displayed any acute caution with the yield on the 10-year U.S. treasury yield trending about 18 bps lower versus late May highs. The iShares 7-10 Year Treasury Bond ETF IEF lost 1.75% in the last month, according to Benzinga Pro.

Read Next: GOP Presidential Candidate Tim Scott Lashes Out On Biden’s Inflationary Policies: ‘Reckless Spending… Reason Your Wages Can’t Keep Up’

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