The U.S. is better equipped to combat the new coronavirus than any other country in the world, according to Harvard University economics professor Kenneth Rogoff.
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Its advantage is "not just on the medical side but also on the economic side,” Rogoff, a Harvard University economics professor and former chief economist at the International Monetary Fund, told FOX Business’ Maria Bartiromo on Thursday. “But of course there is going to be a sharp slowdown. It’s really hard to imagine there won’t be. I think the rest of the world is going to be worse.”
Conditions are "a lot worse for China than they are for the United States," Rogoff said, and he expects a supply shock will reach the U.S. from a slowdown in Chinese production. Rogoff says it's too soon to tell whether the outbreak will hurt demand, which can be buoyed by interest rate cuts and fiscal stimulus.
On Tuesday, the Federal Reserve announced an emergency 50-basis point rate cut, reducing its benchmark interest rate to a range of 1 percent to 1.25 percent, in an effort to stimulate the U.S. economy amid fallout from COVID-19. Central banks in Australia and Canada have also lowered rates, and others are expected to as well.
Rogoff said there's not much more the Fed can do about the outbreak. Government stimulus is a possibility, but the trillion-dollar U.S. deficit, which widened after a tax-code overhaul in 2017, might put limits on that as well.
Government stimulus might also lead to "upward pressure on inflation," causing it to hit 3 percent or 4 percent down the road, Rogoff said. Still, he believes Washington should act, adding that he'd "rather have a bit of inflation than get it wrong."