US Scholar Kenneth Rogoff: "Six Rate Cuts Impossible Unless Worst Recession Occurs"

IMF-Economist Expert on Economic Crisis
"Fed to Cut Interest Rates 2-3 Times"
"Facing Second Cold War... Very Unstable"

Kenneth Rogoff, a former chief economist at the International Monetary Fund (IMF) and an expert on economic crises, expressed a negative outlook on market expectations that the U.S. Federal Reserve (Fed) will cut interest rates six times this year.

On the 16th (local time), Professor Rogoff said in an interview with Bloomberg Television at the World Economic Forum Annual Meeting (WEF, Davos Forum) held in Davos, Switzerland, "If the U.S. economy achieves a soft landing, the idea of six rate cuts is just a fantasy," adding, "The Fed will cut rates two or three times."

Kenneth Rogoff, Professor at Harvard University

Recently, some market participants have continued to expect that the Fed will begin cutting interest rates as early as March and implement up to six cuts within the year. However, Professor Rogoff put the brakes on these market expectations.

Rogoff predicted that the Fed would aggressively cut rates only in the event of the worst economic recession. He said, "If a severe recession occurs, the Fed will cut rates multiple times," adding, "Not just six times, but if necessary, it could cut rates 15 times." He further noted, "However, I estimate the probability of a severe recession at about 25%."

Professor Rogoff drew a line between his outlook and that of the majority of Davos Forum attendees who are optimistic about this year's economy. He is an economic crisis expert known for analyzing past financial crises. On the same day, Kristalina Georgieva, IMF Managing Director, said, "2023 was slightly better than we expected," and "There is a tailwind from 2023 through 2024." In contrast, Rogoff said, "Overall, the U.S. economy will not be tremendously strong like in 2023, but it will not be bad either," predicting, "Inflation will decline, and there will be a soft landing."

In addition to the war between Ukraine and Russia entering its third year, the Middle East has recently become a powder keg again. The prolonged war between Israel and the Palestinian armed group Hamas has expanded to neighboring countries. On this day, the U.S. launched its third airstrike against the pro-Iran armed group Houthi. Since November last year, the Houthis have controlled the Red Sea shipping lanes and attacked civilian vessels under the pretext of supporting Hamas against Israel.

Professor Rogoff, who has been active as an economist, said this is the first time he has seen such geopolitical conflicts and pointed out, "Above all, the volatility of inflation will increase." He assessed, "We are in a second Cold War," adding, "This could be a hotter Cold War than before and is very unstable." While saying, "We could have a good 2024, and not everything will be bad," he expressed concern that "(geopolitical conflicts) will not leave our minds."