'Completely unrealistic' for U.S. Fed to lower interest rates to 2.5% in this economy, Kenneth Rogoff says

I think we’re likely to see a world where say U.S. Treasury 10 year treasuries are more like 4.5 then I guess they got down almost at 1.5 at one point and higher mortgages, higher real interest rates, I think that’s the norm. I think when the Fed finishes the cycle and brings down its interest rate, I think it’s going to be 3/5 at the end of maybe another year and a half or two, it’s not coming all the way down to two. The way some people are saying even 25, I think it’s going to be higher. So another side of that is rates in the states are not as high as they seem. There’s they’re tight, but they’re not as ultra tight as I think people originally thought who failed to recognize that real interest rates were going to eventually bounce back. There are so many challenges in terms of discerning inflation, aren’t there, Professor Rogoff? Because. We have the last mile, which is always difficult to calculate. We and we have. The the structural changes in the economy and the changes in the in the workforce, automation and AI. So arguably the Fed doesn’t have the right speedometer. So what then is the most appropriate course of action for the Fed? Given just how nonlinear inflation is at the moment. I think they need to be patient. I mean, you’re right, AI alone is sort of a like the printing press. It’s a huge change. We’re still recovering from understanding what went on with the pandemic. We don’t really understand what the open borders policy has done to immigration. There are a lot of things where I think they need to wait and see and the thing they definitely have to look at is inflation. They want to see inflation come down. They don’t want to be the cause of a big recession. They don’t want to wait too long. But on the other hand, the signals just aren’t screaming out to do a rate cut soon and. I I I’m sure the Fed governors are adjusting. Their expectations of how many rate cuts they’re going to do down for this year, but I also think they’re probably starting to rethink this issue of where are they going to end up. Because if you look at what they’re they were reporting last meeting it was to get the rate eventually down to two, five and or two, six and I think that’s completely unrealistic in this economy.