• Economist Mohamed El-Erian predicts that inflation will become „sticky“ in midyear, around 4%, despite the Federal Reserve’s attempts to bring it down to 2%.
• The Fed has raised rates seven times since last year and inflation has decreased since reaching double digits in October and November 2022.
• JLL CEO Christian Ulbrich has suggested that 5% may become the new 2%, meaning inflation will persistently remain around 5%.
Despite the Federal Reserve’s attempts to bring inflation levels down to its 2% goal, economist Mohamed El-Erian of the University of Cambridge believes otherwise. El-Erian predicts that inflation will become “sticky” in midyear, around 4%.
The Federal Reserve, headed by its 16th chair Jerome Powell, has been using its monetary tightening policy and interest rate hikes to reduce inflation. Since last year, the Fed has raised rates seven times, with increases happening on a monthly basis. Inflation in the U.S. has slowly decreased since it approached double digits in October and November 2022.
At the 2023 World Economic Forum event in Davos, last week, JLL CEO Christian Ulbrich, among other peers, suggested that 5% may become the new 2%. Ulbrich told the Financial Times that inflation will persistently remain around 5%, and this is something investors and market participants should take into consideration.
El-Erian, president of Queens’ College at the University of Cambridge, agrees with the idea that inflation will be higher than the Federal Reserve’s goal. He stated on January 17 that inflation “may become ‘sticky’ at a higher level than currently anticipated.”
With the Federal Reserve’s efforts to bring inflation down to its 2% goal, investors and market participants are closely monitoring inflation levels. This is especially true as the annual inflation rate dropped to 6.5% in December 2022. While many experts predict it will decrease further, El-Erian and Ulbrich believe inflation will remain at a higher level than what the Federal Reserve hopes for.