Roger Ferguson, former Vice Chairman of the Fed, joins ‘Squawk Box’ to discuss the latest on the Fed’s rate hike campaign, balancing the inflation fight with banking health, whether the economy is ready for a possible recession, and more. For access to live and exclusive video from CNBC subscribe to CNBC PRO:
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The Market Should Pay Closer Attention to the Stickiness of Inflation, Says Roger Ferguson
Inflation has been a hot topic of discussion in recent months, with prices rising across various sectors of the economy. However, according to Roger Ferguson, the market isn’t paying enough attention to how sticky this inflation appears to be. As the former vice chairman of the Federal Reserve and current CEO of TIAA, Ferguson’s insights carry significant weight.
Sticky inflation refers to a situation where prices remain high for an extended period rather than being transient or temporary. It suggests that the rising prices we are currently witnessing may not be just a short-term blip but could have more lasting effects on the economy. Ferguson argues that this aspect of inflation deserves greater scrutiny from investors and policymakers alike.
One of the reasons why inflation has become sticky is the ongoing supply chain disruptions caused by the pandemic. Global supply chains have been severely impacted, leading to shortages of key components and raw materials. As a result, businesses are finding it challenging to meet the demand, leading to higher prices that may persist for more extended periods.
Furthermore, the continued stimulus measures implemented by governments worldwide have injected significant liquidity into the economy. While these measures have played a crucial role in preventing a complete economic collapse, they have also fueled demand. The combination of supply chain disruptions and increased demand have created an environment where prices are likely to remain high for the foreseeable future, adding to the stickiness of inflation.
Ferguson’s concern is that investors and markets seem to be underestimating the severity of this sticky inflation. Many market participants believe that inflationary pressures will naturally subside once the global economy fully recovers from the pandemic. However, this assumption overlooks the fact that sticky inflation can have long-lasting implications on the overall economy.
Sticky inflation can erode purchasing power, reduce consumer spending, and lead to a decline in economic growth. If prices remain high for an extended period, people will have to spend more on basic necessities, leaving them with less disposable income to invest or save. This can have a ripple effect on the overall economy, dampening business growth and investor confidence.
In order to properly navigate this sticky inflation, a stronger focus is needed from both investors and policymakers. It is crucial to understand the underlying causes of inflation, such as supply chain disruptions and increased demand, and their potential long-term impacts. This information can help guide investment decisions and policy responses, ensuring that measures are in place to mitigate the effects of sticky inflation.
In conclusion, Roger Ferguson’s warning about the stickiness of inflation highlights an important aspect that the market has been overlooking. As prices continue to rise across multiple sectors, it becomes essential to pay attention to the potential long-term implications of this inflationary trend. By understanding the causes and effects of sticky inflation, investors and policymakers can make more informed decisions that will safeguard both the economy and individual financial well-being.
>>Great video and some excellent tips! These are scary times for new investors but the best thing you can do is not to make decisions based on emotions. This could actually be a good time to buy more of your high conviction stocks or crypto on a discount. Wealth is created during bear markets, not bull markets. If your portfolio is really effecting your mental health then delete the app and go for a walk. Let the market do its thing and have a long time horizon. Just ensure you working under the guidance of an efficient and reliable professional <FA>
My portfolio has good companies, however it has been stalling this year. With the present inflation and dollar devaluation I just got my money out of the bank, I invested some in gold and silver and I’ve approximately $700k stagnant in my reserve that needs growth, any suggestions to grow my portfolio will be highly appreciated.
I listen to Roger, to get my sanity back
Maybe if the federal government cut their budget in half we would have lower inflation and less debt???
perhaps she should refrain from using the term "off the reservation" in the future as its roots lie in segregationist policies that tied indigenous people to reservations, and overall poor treatment of our native brothers and sisters.
How to Hedge Against Inflation: Keep some extra cash on hand, Invest in Various Assets (stocks, real estate, etc.), If you are going to take on debt, better to take it on earlier (assuming you can pay it) before interest rates rise. Refinance
Find it funny how all these "experts" talks about interest rates , monetary policy but completely avoid talking about worsening US China relation. If this relation continues to go sour no amount of Rate hike will control inflation. India is at least 10 years behind in terms of labour skills, infrastructure. Feel like they guests are actually strictly told to not bring this topic on air at all.
How many more Banks is the Fed going to break with ever increasing interest rates. Bye Bye depositors, wonder how European Banks keep deposits with negative rates?
The longer they "wait and see" the middle class gets more and more wiped out.
FED officials smoking crack. CPI should be under 4% after the July inflation data due to the base effect. Then we replace the 2021 numbers with 2022 after December? Gtfoh
The government has no firm plans to combat inflation. Stocks, Houses and commodities will rise along with everything else as they will continue to inflate. You can't just sit on your cash and wait for a crash; you have to put your money to work, start investing gently, and then pick up the pace as the prices fall further. Making the decision to take money out of my account in excess of $500K at this time is more difficult. I am aware of certain investors that continue to make that much despite the terrible downturn market. I wish I could pull that off.
I am solidly in the "pause" and see loads of evidence that "frontloading" is damaging and counterproductive. The market bets on cuts by the end of the year are a huge vote of "no confidence" in the fed actions, and a high certainty that they are creating problems that will require easing.
They gonna raise it
I have two jobs and spend all of my money on rent and groceries. Is this a good investment strategy? Should I diversify and spend some of my earnings on gas for my car?
These past few days of ECONOMIC INSTABILITY, INFLATION and RECESSION watching my portfolio decline is very disheartening. Holding doesn't really profit much. Any idea on how to earn better in the market?
I would advise using the recession and inflation to your advantage. You can only prepare for and make plans for them because recessions are an inevitable element of the economic cycle. I entered a rut after graduating, I worked as an aerial acrobat on cruise ships as my first job out of college. I currently manage my own business, work as a vice president for a large organization, own three rental homes, invest in stocks and companies, and have improved my net worth by $500k over the past 28 months.
Isn't the majority of the market trades performed by software ?
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Its simple, just short banks that already cut or will cut risk management budget at a time like this. Just get someone to ask on the call where their cost reduction will come from or just straight up ask if they will cut risk management budget.
Excellent questions and follow up. Mr Ferguson says it like it is. Keep on the objective path CNBC.
Inflation is sticky because companies have high debt unlike 1980s forcing them to keep rents & prices high to serve the debt. Powell will crush economy and cause widespread defaults and inflation will still remain high. He’s the new Fauci
Fed chair Neal Kashkari says inflation is down, Fed chair Bullard says I am from the "show me state".