The central bankers have done enough monetary tightening, and the Federal Reserve should stop rate hikes, top economist Paul Krugman said Friday.
The comments came a day after the October consumer price report closed lower than expectations, suggesting that inflation is responding to the Fed’s nearly 400-basis-point increase this year.
“My view is that the Fed has probably done enough already. And they really, really should pause and wait to see,” Krugman told Bloomberg TV.
But he doubted the central bank would change its rate-hikes stance, as it has been struggling to restore its credibility on controlling inflation after describing it as merely “transitory” last year.
A Fed pause could hurt its reputation further – even if staying the course means potentially overtightening the economy.
“They do feel they have some credibility to rescue, because they understated inflation. That will probably cause them to go a bit too far,” Krugman predicted.
Too-high interest rates could stop economic activity and cause a recession, experts have warned.The Fed’s rate hikes also have a lagging effect on the economy – meaning current inflation figures could be overstated, and already well on the way down.
