Kenneth Rogoff, professor at Harvard University, The former chief economist of the International Monetary Fund said,Morning with MariaOn Thursday the downturn in the United States Economie The first quarter is “shocking”.
The economist made the comment shortly after revealing that gross domestic product, the broadest measure of goods and services produced across the economy, fell at an annual rate of 1.4% in the three-month period from January through March, noting that the figure was believed to be “lower”. of the worst.”
And the Ministry of Commerce revealed in its first reading of the data on Thursday that US economy It slowed significantly in the first three months of the year, as crowded supply chains, record inflation and labor shortages weighed on growth and slowed the pandemic’s recovery.
Rogoff noted that he was expecting a low number, but the 1.4% contraction of the US economy is “horrific”. He noted that negative growth combined with inflation accelerating to a new four-decade high last month is not good for the macroeconomic picture.
The Ministry of Labor said earlier this month That consumer price index (CPI) — which measures a range of goods including gasoline, health care, groceries and rents — rose 8.5% in March from a year ago, the fastest pace since December 1981, when inflation hit 8.9%. Prices jumped 1.2% in a one-month period in February, the largest monthly jump since 2005.
The price increases were widespread: Energy prices were up a staggering 11% in March from the previous month, and up 32% from a year ago. On average, gasoline costs 48% more than it did last year after rising 18.3% in March month-on-month as the Russian war in Ukraine fueled a rapid increase in oil prices.
Rogoff noted that the economy is “a story of growth, but it is deteriorating, and the question is, to what extent?”
“The consumer has a lot of money saved from stimulus checks and savings from the pandemic, but on the other hand, inflation is really high, the war is still going on, and I think the biggest unknown is this Fed tightening cycle.”
He said that if the Fed didn’t “get too high, there would be inflation, and if they did, there would be a massive recession.”
A recession refers to the contraction of GDP activity, the broadest measure of goods and services produced across an economy, for two consecutive quarters.
“What I’m really concerned about is that I don’t see how the Fed is going to cut inflation, say 2.5 to 3%, and not have a massive recession,” Rogoff said.
“I think to do that, they’ll have to raise rates by at least 4, 5%, and over the next year and a half, I don’t think they will.”
He continued, “I think we will end with high rates of inflation and perhaps even recession.”
Chairman of the Federal Reserve Jerome Powell Last week boosted expectations for a half-percentage point rate hike at the central bank’s May meeting as officials look to tame hyperinflation.
Megyn Heaney of FOX Business contributed to this report.