While the conflict in Ukraine is a hot topic, fears of rising inflation continue to haunt Americans residing in the country, as economists and analysts note U.S. inflation will likely remain high. Inflation is likely going to be worse than initially feared this year, Goldman Sachs explained in a report published on Sunday. Moreover, in terms of inflation coupled with the Ukraine invasion, an economics professor at American International College (AIC) stressed there’s “a perfect storm brewing.”
Inflation has been ghastly in 2022 and it may not get better this year, according to a new inflation report stemming from Goldman Sachs economists on Sunday. “The inflation picture has worsened this winter as we expected, and how much it will improve later this year is now in question,” the note from the financial institution explained. Goldman’s note to investors, follows the Consumer Price Index (CPI) report that showed inflation in the U.S. climbed at its fastest rate in 40 years since February 1982.
US Inflation hit a 40-year high this month and the Fed is still buying bonds. Their balance sheet hit another record high this week at $8.93 trillion, more than doubling over the past 2 years. New Fed policy: throw fuel on the inflationary fire.
Charting via @ycharts pic.twitter.com/FlwNuog4Zr
— Charlie Bilello (@charliebilello) February 27, 2022
Goldman’s report on Sunday further disclosed that the financial institution thinks that inflation could rise higher if there’s a disruption to supply chains and energy producers over Ukraine’s conflict with Russia.
“The initial inflation surge might have lasted long enough and reached a high enough peak to raise inflation expectations in a way that feeds back to wage and price setting,” Goldman Sachs analysts said. The Goldman Sachs report further stressed that a strong jobs market coupled with rising inflation could “threaten to ignite a moderate wage-price spiral.”
Economists and analysts are looking at the U.S. Federal Reserve and are trying to guess what the central bank will do in March. AIC’s professor of economics John Rogers said things will depend on what the Fed decides to do in terms of inflation. “We got a perfect storm brewing,” Rogers told the news desk at wwlp.com. “Inflation is pretty strong at least through the end of the year. A lot of that is what the Federal Reserve is able to do and what happens with this crisis.” The professor continued:
It’s just the geopolitical instability. You’ve seen the stock market highly volatile in the last couple of weeks. Anyone with a 401k plan is probably nervous about. The other big area is energy, it’s a worldwide market and the price of oil goes up around the world, it’s going to affect us as well.
Meanwhile, the Federal Reserve hinted that the benchmark interest rate may increase “soon,” and Fed chair Jerome Powell hinted it would likely be in March. Gold bug and economist Peter Schiff said last week that it’s possible Ukraine’s conflict could make the Fed keep the benchmark interest rate down. “Perhaps, the Fed is relieved that Russia invaded Ukraine as now it has an excuse not to raise interest rates in March,” Schiff tweeted.
Speaking at a Harvard virtual event on Monday, Federal Reserve Bank of Atlanta president Raphael Bostic told the attendees he favors a hike of around 25 basis points. “I am still in favor of a 25 basis-point move at the March meeting,” Bostic told the group of Harvard University students that attended the virtual discussion.
What do you think about inflation worsening in the U.S.? Let us know what you think about the statements from Goldman Sachs, AIC’s professor of economics, and Raphael Bostic in the comments section below.
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