Is inflation close to peak?
Session chair John Lonsky revealed on Wednesday whether high inflation had peaked and argued that there was a “good chance” of a recession by 2024.
The economist told Varney & Co. On Wednesday, he said he believed inflation was approaching a “temporary peak,” which is likely to be set in March on an annual basis, and explained how it “could accelerate again.”
“It may slow, but unfortunately, it could accelerate again if the US economy regains its momentum, but I don’t think that will happen,” Lonsky told host Stuart Varney.
“I think growth will slow, spending will slow and that’s what is needed to contain price inflation.”
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Lonski provided insight as markets were trading mixed Wednesday as the NASDAQ heavyweight composite index is down nearly 30% year-to-date amid fresh concerns about a slowing economy.
Stocks had some tough weeks in anticipation and after a half-point rate hike by the Federal Reserve. This is the second of several expected increases this year as the central bank seeks to combat soaring inflation, which has reached a level not seen in four decades.
The expectation now is that the Federal Reserve will take aggressive action to try to curb inflation, which remains near 40-year highs, according to April data released earlier this month, dampening investors’ appetite for holding assets seen as risky. .
Lonski spoke with Varney a few hours before the Federal Reserve is scheduled to give insight into the decision-making process by releasing the minutes of the latest policy meeting.
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He also noted on Wednesday that he believes spending on consumer services keeps the economy “alive,” but cautioned that “there is no guarantee that this will continue indefinitely.”
Earlier this month, it was revealed that year-on-year inflation eased for the first time in months in April, but rose more than expected with supply chain restrictions, the Russian war in Ukraine and strong consumer demand that continued to keep consumer prices high.
The Labor Department said earlier this month that the Consumer Price Index, a broad measure of the prices of everyday goods including gasoline, groceries and rents, rose 8.3% in April from a year ago, less than the 8.5% year-on-year rise. in March. Prices jumped 0.3% in the one-month period in March.
Those numbers were above the headline 8.1% and the 0.2% monthly gain that economists at Refinitiv had expected.
Lonsky confirmed Wednesday that he does not think the United States will experience a recession immediately, but pointed to “shocking” new data, specifically new home sales, noting that such data indicated “unexpected signs of weakness in the US economy.”
On Tuesday, it was revealed that sales of new single-family homes in the United States last month fell significantly more than expected to a two-year low as rising construction costs, home prices, interest rates and supply chain problems continued to plague the industry.
The latest data from the US Census Bureau shows that the pace of new home sales fell 16.6% in April from the previous month at a seasonally adjusted 591,000. Analysts polled by Refinitiv had expected a decline of 1.7%.
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The decline is 26.9% lower than last year, and the lowest since April 2020. This is the fourth consecutive month that new home sales have fallen.
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Brick Dumas of FOX Business contributed to this report.