STORY: Chatter of stagflation had been fanned by news of a sharp moderation in economic growth and a surge in inflation in the first quarter.
Asked earlier this month about the risk the U.S. was entering a period of stagflation, Federal Reserve Chair Jerome Powell said current conditions are nothing like those seen in the late 1970s when prices were rising more than 10% annually at one point alongside high unemployment.
Rathbun said that since the risk of stagflation is low, the Fed should start lowering interest rates "sooner rather than later" to help sectors that have been hit hard by higher borrowing costs, such as the housing market.
"If housing activity resumes toward normalization, I do think that rent prices and inflation on the rent side, may start to come down," said Rathbun. "Ironically, lowering rates could actually help with the inflationary scenario."
