Key Square Group founder Scott Bessent and America First Policy Institute chief economist Michael Faulkender discuss former President Trump’s agenda regarding ‘Kudlow.’
A prominent economist and educator warns that Americans who have been suffocated by the highest rate of inflation in four decades are unlikely to see rates drop in the future.
Allianz chief economic adviser Mohamed El-Erian said on Sunday that while inflation has cooled, that means the rate of inflation has slowed. It doesn’t mean, he explained on CBS’ “Face the Nation,” that prices will eventually drop to levels seen before inflation spiked in 2022 after the COVID-19 pandemic.
“Well, we know that the Federal Reserve meets later this week, it may move forward on interest rates again, as inflation is close or close to that 2% target, but for the average person, they’re seeing higher housing prices. They’re seeing higher grocery prices. are still high. Where is the situation where those prices really come down?” asked host Margaret Brennan.
“Yes, and that’s what everyone is hoping for, but it’s not going to happen.” El-Erian answered.
WHY ARE PEOPLE NOT BUYING THE ECONOMY WHEN INFLATION IS COOLING?
Mohamed Aly El-Erian, Allianz’s chief economic adviser, shakes his body during an event at the University of Cambridge, United Kingdom, on Nov. 25, 2021. (Hollie Adams/Bloomberg via / Getty Images)
“Look, the good news is that interest rates will continue to fall. The good news is that inflation, which is the rate of increase in the cost of living, will decrease. But it is very difficult to reduce prices, and that is another political problem, if you tell people that inflation is going down, in their head they think that prices are going down, not rate of increase in prices,” he explained.
“So it’s a misunderstanding, unfortunately, but you have to be careful what you wish for, because if prices drop too much, we’re in a very bad economic situation.”
FED’S FAVORITE INFLATION GAUGE SHOWS PRICE GROWTH CONTINUES IN SEPTEMBER
Inflation rose to a 40-year high of 9.1% annually in June 2022 after pandemic-related supply disruptions and a buildup of government spending on aid and other programs. Although it has since fallen to 2.4% in September and the labor market remains strong amid the Federal Reserve’s interest rate hike to slow the pace of inflation, rates are still about 20% higher than four years ago.
Inflation and the economy remain issues for voters who will vote for the next president of the United States on Tuesday. Both Democratic candidates, Vice President Harris and Republican former President Trump have put forward economic plans they say will ease inflationary pressures on families and spur economic growth.
Harris has called for new government spending in the form of investments in small businesses and tax credits for families with children, while Trump has promised to ease regulations on energy production and raise national debt repayment rates.
US ECONOMY CREATED 12K JOBS IN OCTOBER, BELOW ECONOMIC EXPECTATIONS
People shop at a grocery store in Brooklyn on July 11, 2024, in New York City. (Spencer Platt/Getty Images)
El-Erian said that although prices are still higher than they have been in the past four years and the October jobs report came in well below expectations, the overall economy is in good shape.
“Therefore, most of the reports, as you mentioned, have been distorted in a very important way, by the strikes, by the storms,” ​​he said.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
“The bottom line, Margaret, is that we have a growing economy. Inflation is coming down, and the next administration’s biggest challenge is not only to maintain so-called economism, because we are outperforming all other advanced economies. that is very important.
Fox Business’ Eric Revell contributed to this report.
Source link