We expect 4% inflation by 2023 as the Fed raises interest rates; These assets are resistant to recession – Peter Berezin

(Kitco News) — The Federal Reserve raised its key interest rate by 75 basis points on Wednesday, and Chairman Jerome Powell did not rule out more aggressive rate hikes ahead. Powell also said that the US economy is not currently in a recession, mainly due to the strong employment numbers.

“I suspect [Powell] Peter Berezin, chief global strategist at BCA Research, said, “If you look at consumers, they’re still spending, despite the fact that real wages are shrinking. Now it’s very likely that inflation will fall over the next 12 months. It probably won’t rise from 9 to 2 percent, but it’s likely to go up at least 9 to 4 percent.”

Berezin spoke with David Lane, broadcaster and producer at Kitco News.

Who defines stagnation?

Whether the United States is in a recession or not has become a politically charged topic. Recent Commerce Department data indicates that the US economy has experienced two quarters of negative GDP growth, the standard definition of a recession. This is the definition endorsed by Biden’s economic advisor Brian Deiss in 2008. However, Dess recently said that other factors should be taken into account before declaring a recession.

“A recession in the United States is whatever the National Bureau of Economic Research sees,” Berezin said. “The fact now is that some measures of economic activity point to a recession, while others do not. In particular, the labor market, which often weakens during a recession, has not yet begun to weaken.”

The latest figures show an unemployment rate of 3.6 percent in June, which is considered low for the US economy.

Inflation and Federal Reserve policy

The Fed aims for an inflation rate of about 2 percent. The latest data from June shows an inflation rate of 9.1 percent.

Berezin said the Fed will try to bring down inflation, but it will require a reduction in economic growth.

“Some of these supply-side bottlenecks … will dissipate over time and that will help reduce inflation,” he said. “Is inflation going all the way down to 2 per cent without any increase in the unemployment rate? That is uncertain. So, I am not saying we will avoid a recession. I think we will avoid one over the next 12 months, but in the end it may take some The economic pain of bringing inflation back to 2 per cent.”

He added that at the upcoming FOMC meeting, the Fed will raise interest rates by “50 basis points, then maybe do 25 basis points, and then just wait and see how the economy responds, because as the old economic saying goes, monetary policy works with delays. Long and variable, usually 12 to 18 months. The Fed wants to see the impact of this tightening before it continues.”

For Berezin’s recommendations for recession-proof assets, watch the video above.

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