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Four experts react to May's hotter-than-expected inflation report - YouTube
Channel: CNBC Television
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yeah look i mean you look at
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the monthly number that's what i'd look
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at not the 12 months i'd look at the
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core because there's a lot of volatility
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and other stuff that monthly number was
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an 8
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annual rate
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for core cpi you can point to some
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special factors there car prices were up
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again in may some of that is supply
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chains out of china out of ukraine
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airfares are up a lot some of that is
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people resuming their travel
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but even take all those special factors
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out the underlying inflation rate here
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is quite high and it's potentially
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rising now i think the good news is the
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fed was behind the curve last year i
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think they're there now they're going to
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do 50 basis points at the next two
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meetings they're not going to let up in
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september it's going to take them a
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while to tackle this but i think they
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their heads really are in the right
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place right now and this number will
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keep it there i thought jason that when
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i watch the stock market on certain days
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i think it's worried about the terminal
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rate
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i don't know how many 50s we do
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uh do you expect it to
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are we undershooting or overshooting for
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what we think where the fed finally
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stops and then the reason i'm asking you
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that is
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if the fed
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stopped raising rates can inflation
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alone cause a recession i always think
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that inflation causes the fed to to
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shut down business activity with higher
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interest rates than i uh
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ack a volcker but
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if they didn't raise too much can
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inflation itself cause consumers just to
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say no no moss i'm not going to spend
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any more i can't afford it so i'm not
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going to and everything shuts down have
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we seen that historically
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on your second for the most part no
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because when prices are rising faster
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wages are rising faster and so people
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can afford those higher prices right
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right now wages have been behind prices
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but at some point probably i hope um
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they'll catch up on your first question
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i think the fed's raising rates at a at
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a decent clip clips
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right but that's where my complaint is i
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think they need to be clear my modal
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expectation is four percent fed funds
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rate at the end of 2023. i think they're
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going to need to do that to deal with
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this inflation very high i don't think
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the market's ready for i don't think the
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market sorry at least four i don't think
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the market's ready for it though they've
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not priced that in
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okay four god at four we we would have
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killed for four uh in many periods of
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the past it would have been they would
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have been dropping in half to get the
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four it seems like
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um where we go mona
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or straight i guess we should do strain
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are you gonna argue with uh i'll let you
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talk if you're gonna argue with jason
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i'd love to argue with jason um i uh i
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think that uh this is a bad headline
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number inflation is a real problem if
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you kind of look under the hood you see
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uh much less
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uh of a problem in underlying inflation
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the two big things that i've been
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worried about are shelter inflation
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and services less energy inflation those
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both look a lot better than uh than the
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headline look they look better than the
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headline
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core look as well and that's the real
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question the real question is are we in
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for a period where we uh see wages
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pushing up prices and then prices
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pushing up wages and then waging wages
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pushing up prices or are we in for a
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period where
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you know we have high gas prices we have
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an economy where the good services tilt
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is starting to normalize but the fed can
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get it under control this tells me that
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we're not in for five years of misery
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that the fed will be able to get it
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under control
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why is that i don't understand
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uh because this tells me that inflation
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is not is not accelerating kind of
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throughout the economy
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again
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durable goods inflation has been
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declining
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shelter inflation has been rising
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services inflation has been rising but
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we didn't see a big acceleration in
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shelter inflation uh last month we
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didn't see a big acceleration
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in services less energy last month uh
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and so if if if things are kind of
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plateauing along those dimensions then
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i would expect that higher interest
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rates would be able to cool off demand
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uh and and the kind of wage price spiral
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that we're all concerned about seems
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less likely okay we have time now mona
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although i'm dying to get to kathy
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bostanczyk just so i can say kathy b
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uh and i'm going to start that that is
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going to stick i think uh cathy but mona
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what do you think
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yeah you know we're kind of in the camp
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where uh michael is falling out on this
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i think generally
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while headline inflation will continue
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to cause some concern you know it's hard
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to handicap
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what the war in russia will how the war
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in russia will play out we're seeing
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china come back online all of those
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factors will lead to higher demand for
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energy higher food prices potentially
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but if you look at the core inflation um
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services uh and shelter and rent are
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about a third of cpi and we're seeing in
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in mortgage prices you know moving
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higher that is putting some downward
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pressure on housing it takes a little
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bit of time for that to play out into
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cpi but over time that should be a
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supportive factor for lower core cpi uh
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also what we're seeing in terms of some
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of the headlines around the tech layoffs
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for example
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over time that will play into lower
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wages as well and so we think generally
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some of the components of core cpi
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should trend better keep in mind the
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fed's preferred metric is core pce
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raising rates can't really impact um you
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know wti or energy and food prices all
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that much it's really their focus should
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be on
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bringing down the core and hopefully
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over time that's the trend we'll see
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kathy you know i practice too it's kind
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of a waste if i start calling you kathy
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b after practicing how to how to
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actually say you're that but i'm going
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to do it today what do you think kath
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well i i think that this is still a
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concerning read for for the federal
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reserve um i do agree with mona's points
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our own view is that inflation will
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trend lower as
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economic activity slows and interest
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rates start to bite but when i look at
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um you know owners equivalent rent so
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rental prices they they actually did
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pick up they were up six tenths it had
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been running 510 so that's a hot number
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uh service core service
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prices are are picking up um core goods
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aren't cooling quite as quickly as some
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people expected and let's keep in mind
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remember in march people were cheering
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that oh we reached the peak in inflation
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well we just found out today we didn't
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um we're back or higher today right year
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in year 8.6 percent so
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gasoline prices are going to stay high
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so i do agree eventually this is going
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to cool and and we should see um
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you know cooling along with wage growth
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as well but i think it's going to take a
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bit more effort by the federal reserve
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in time and i i would think that 50
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basis points you know next week july and
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this puts 50 basis points on the table
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for september too i believe
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