Harvard economist Martin Feldstein predicts that the Federal Reserve’s game plan to continue hiking interest rates will eventually choke economic growth and kill the seemingly endless bull market.
“What worries me is not what’s happening now but what will happen as long-term interest rates rise,” he told Fox Business Network’s Maria Bartiromo.
“They’ll cut into the growth and they’ll cut into the market,” Feldstein said.
As far as he is concerned, the central bank’s strategy is too much too late.
“The Fed should have started raising rates… three years ago,” he said. “We’ve run a decade of negative real rates and that’s put us in a bad position.”
Feldstein said that the Fed has to gradually push up the rate because when the economy slumps they have “no ammunition.”
To be sure, even some central-bank officials seem at odds with the official Fed strategy.
St. Louis Fed President James Bullard said on Thursday the Fed's current monetary policy path would raise the risks of recession in an economy where recent, unexpectedly strong growth may start to taper anyway.
In remarks to the Economic Club of Memphis, Bullard pointed to a possible next chapter in the central bank’s discussion: What to do if, as expected, the growth rush from recent tax cuts, increased government spending and other positive economic trends begins to fade, Reuters reported.
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