Mohamed El-Erian speaks at the Milken Institute Global Conference, May 1, 2017. Reuters.
The U.S. Federal Reserve (Fed) will struggle to attain its target of 2% inflation despite recent rate hikes, according to two leading economists.
Harvard University professor Kenneth Rogoff and Mohamed El-Erian,
president of Queens' College, Cambridge, both said the Fed's 2%
inflation target is too low.
- El-Erian
told Bloomberg on Tuesday that U.S. inflation is likely to get "stuck at
3% to 4%," despite the Fed "promising us 2% in the future."
- He
noted that the Fed would risk damaging its credibility if it chose to
change its inflation target after missing it for so long.
- Rogoff said the Fed should have originally set an inflation target of 3% rather than 2%.
- He
said the Fed will allow inflation "to be elevated for longer," despite
continuing to tell the public that it will "get back to 2%."
- The Consumer Price Index (CPI) rose by 9.1% over the 12-month period ending in June 2022.
- The Fed hiked interest rates seven times last year in a bid to stem inflation, which reached a 40-year high in June.
- On Feb. 1, the Fed raised its benchmark interest rate to a target range of 4.5%-4.75%, its highest level since 2007.
