Stephen Roach, known for serving as Morgan Stanley Asia chair, warns the Fed’s aggressive tightening policies haven’t kicked in yet.
Roach, a Yale University senior fellow and former Federal Reserve economist, suggests Fed Chair Jerome Powell has no choice but to take a Paul Volcker approach to tightening. In the early 1980's, Volcker took an aggressively hiked interest rates to tame runaway inflation.
"Go back to the type of pain Paul Volcker had to impose on the U.S. economy to ring out inflation. He had to take the unemployment rate above 10%," said Roach."The only way we're not going to get there is if the Fed under Jerome Powell sticks to his word, stays focused on discipline, and gets that real Federal funds rate into the restrictive zone. And, the restrictive zone is a long ways away from where we are right now.". It matches the lowest level since 1969.
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