WSJ's Take On the Week
Why This Harvard Economist Is Worried About the U.S. Dollar
May 11, 2025
Ken Rogoff, a Harvard economist and former IMF chief economist, discusses his concerns about the declining purchasing power of the U.S. dollar. He emphasizes its implications for consumers and investors, linking it to themes of 'American exceptionalism.' The conversation explores the dollar's waning supremacy in global finance and the potential rise of alternative currencies. Rogoff also touches on the historical context and future challenges the dollar may face, providing keen insights from his new book, "Our Dollar, Your Problem."
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Quick takeaways
- The Federal Reserve's cautious approach reflects a balancing act between supporting economic growth and managing inflation risks amid mixed data.
- Harvard economist Ken Rogoff warns that the decline of the U.S. dollar's purchasing power poses significant risks for consumers and investors.
Deep dives
Federal Reserve's Monetary Stance
The Federal Reserve's recent decision to maintain its target interest rates between four and a half and four and a quarter percent highlights a cautious approach amid ongoing economic uncertainties. Fed Chair Jerome Powell emphasized the importance of waiting for clarity on tariff policy, reflecting concerns about inflation and its potential impact on consumer spending. This patient stance is a response to mixed economic data, signaling that the Fed recognizes the delicate balance needed to support ongoing economic growth while managing inflation risks. Investors are closely monitoring indicators such as shipping and trucking data to gauge the tariffs' ripple effects on the economy.
