Kenneth Rogoff, Maurits C. Boas chair of international economics at Harvard University and former chief economist at the International Monetary Fund, sits down with Yahoo Finance Senior Reporter Jennifer Schonberger at the 2025 World Economic Forum in Davos, Switzerland, to discuss President Donald Trump's proposed tariffs and the impact on the US economy and the Federal Reserve.
Tariffs have been a central focus of Trump's second term, sparking debate about whether they will fuel inflation, upend the Federal Reserve's efforts to cut rates or be used without being inflationary. Some expect Trump's actual tariff policies to be different than promised and that the president is using tariff threats as a negotiating tactic.
"The inflationary impact is not a big deal," Rogoff says, adding, "I actually think normally the Fed would ignore that [small inflation impact]."
"More worrisome is that it's chaotic. It hurts these animal spirits that he's been benefiting from. It actually leads to slower growth that happened or was threatening to happen when he raised tariffs in 2018," the economist says, adding, "It's so hard to predict anything from Trump, particularly. I don't think he knows what he's going to do. He is sort of winging it."
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Rogoff says he doesn't expect the Fed to deliver the two rate cuts the central bank previously indicated. "I think the odds of a hike are the same as the odds of a cut."
"With the running these deficits and continuing [with] the economy [looking] strong in many ways, there's a lot of investment going on in data centers and such with [artificial intelligence] AI. That whole notion that the Fed seemed to have that the neutral interest rate was just really low, they can throw that out the window."
Click here for more of Yahoo Finance's coverage from the World Economic Forum in Davos.
This post was written by Naomi Buchanan.