U.S. crude oil briefly touched a 14-year high of $130 a barrel on Monday as the Biden administration continued to lobby for a ban on Russian oil and natural gas, inciting fears that the worst of inflation might no be the in the rearview mirror just yet.
Yardeni says we’re already in stagflation
Such is also the outlook of Ed Yardeni – the President of Yardeni Research, who says the U.S. is already in stagflation due to the Ukraine war. This afternoon on CNBC’s “Halftime Report”, he said:
Now with war and what’s happened with commodity prices, we’re looking at higher inflation and inflation won’t peak for a while. The concern also is that we get more wage price spiral inflation. Since the war, stagflation is the scenario that’s most descriptive of what is and what will be.
Yardeni finds the current macroeconomic drop as quite similar to the 1970s.
What Yardeni expects from the U.S. Fed
Now that the third round of peace talks between Russia and Ukraine have concluded without a breakthrough, Yardeni expects the U.S. Federal Reserve to be less aggressive in addressing inflation. He noted:
The central bank can now stay behind the curve and argue there are extremely complex geopolitical circumstances which raise a lot of uncertainty. So, the Fed will raise interest rates, but very gradually, because the last thing the U.S. needs right now is a recession.
Fed Chair Jerome Powell is expected to announce a 25-basis point increase in interest rates this month. The S&P 500 index lost another 2.5% on Monday.
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