Rogoff, Kenneth, (2016), “Big Danger at the Lower Bound”, Project Syndicate, 2 November
Markets nowadays are fixated on how high the US Federal Reserve will raise interest rates in the next 12 months. This is dangerously shortsighted: the real concern ought to be how far it could cut rates in the next deep recession. Given that the Fed may struggle just to get its base interest rate up to 2% over the coming year, there will be very little room to cut if a recession hits.
Relevant Posts
- Cukierman, Alex, (2016), “Reflections on the natural rate of interest, its measurement, monetary policy and the zero lower bound”, VoxEu, 15 October
- Ball, Laurence, Gagnon, Joseph, Honohan, Patrick, Krogstrup, Signe, (2016), “What Else Can Central Banks Do?”, ICMB – CEPR, Geneva Reports on the World Economy 18, September