On Thursday (November 9th) local time, Erian, Chief Advisor of Allianz AG in Germany, stated that although the US economy will soon see a significant drop in prices, inflation will not return to the Federal Reserve's 2% target soon.
Erian said in an interview that Wall Street is more optimistic about the economic outlook, and major companies such as Goldman Sachs have recently predicted a significant "de inflation" in 2024, and the likelihood of an economic recession is not very high.
Erian also believes that the risk of recession is smaller than a year ago, and inflation may further cool down. But he warned that the magnitude of inflation cooling may not be as large as the market or the Federal Reserve would like.
I do believe that on an overall level, we will face more 'de inflation', which is quite drastic, but I disagree with their view that the core inflation rate will reach 2%. "Erian said," I think the core inflation rate will be around 3% in the coming years
"We have encountered some substantial problems in the supply side, and it will take several years to solve these problems." He pointed out some factors that have kept prices high for a long time, including the cracks in the global economy, the continuous interference of the COVID-19 epidemic on the supply chain, and the transformation of enterprises to green energy.
US core CPI annual rate
All of these will lead to inflation, and they will not disappear soon. "The September data also showed that the year-on-year change in the overall US CPI has slowed to 3.7%, but the core CPI annual rate recorded 4.1%. It has been maintained above 4% for nearly two and a half years.
In response to inflation, the Federal Reserve has raised interest rates 11 times since March last year, with a cumulative increase of 525 basis points. Yesterday, Federal Reserve Chairman Powell stated that further interest rate hikes were needed to achieve the long-term goal of reducing inflation to 2%.
Powell stated that the Federal Reserve is committed to achieving a sufficiently tight monetary policy, but has not yet achieved its goal. If further tightening of monetary policy becomes appropriate, the Federal Reserve will "not hesitate" to do so. After Powell's comments, US stocks and bonds significantly declined.
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