According to market researcher Jim Bianco, Washington’s efforts to contain inflation will fall short, especially this year.
And he believes this week’s key inflation data will help prove it.
The president of Bianco Research told CNBC’s Fast Money on Monday: “I don’t see anything that will lower the inflation rate. There are some things that can bring drug prices down, and maybe some other things.” Huh.” “But will it bring down CPI? Will it lower the core CPI enough that we can actually start pricing? No, I do not think so.”
The government publishes its consumer price index [CPI], which tracks the prices people pay for goods and services this Wednesday in July. The Dow Jones expects that figure to fall 0.4% to 8.7% from June. Unlike the core CPI, the headline number includes energy and food. The government will publish its producer price index on Thursday [PPI],
Bianco argues that the inflation peak may be yet to come.
“Inflation remains constant. Will it be 9.1%? Probably not. But it could settle in the 4%, 5% or 6% range,” he said. “What does that mean? We need a key interest rate of 5% or 6% if inflation is to calm down there.”
According to Bianco, there is no short-term solution. As long as payrolls warm, he warns, inflation will continue to grip the economy.
“The wage inflation we saw in Friday’s report is 5.2%. [year-to-year], and it looks very tacky there,” Bianco said. “If we have 5% wages, you can pay 5% inflation. So it won’t be much below wages. To bring inflation down to 2% we need to bring wages down to 2% and wages are not going up yet.”
“If you don’t want to pay extra for this car, you have to walk”
Bianco cites used car prices as a prime example of unstoppable inflation. They believe high sticker prices will not increase significantly for months due to demand, supply chain problems and chip shortages, forcing automakers to scale back the fittings of new cars.
“If you don’t want to pay extra for this car, you have to walk because that’s the only way to drive right now,” Bianco said.
According to the CarGurus Index, the median price of a used car is $30,886, up 0.2% over the last 90 days and up 10.5% year over year.
“Used car prices have really outperformed cryptocurrencies in the last 18 months,” he said. It is one of the best investments for people.
Bianco believes the anti-inflation bill passed by the Senate later this week will have negligible impact if implemented.
“A lot of this stuff won’t come through for a few years,” Bianco said. “In a world where we want to know what the Fed is going to do in September and when inflation will peak, these are stories 22, 23. They will dominate the markets.”
The House of Representatives is expected to vote on the bill on Friday.