Smead Capital Management says that it will be hard for the Federal Reserve to stop prices from going up.
Bill Smead, the chief investment officer at Smead Capital Management, told CNBC on Tuesday that the high rate of inflation in the US is likely to be “far stickier” and last longer than most people thought.
The comments came before a long-awaited report from the US Labor Department, which showed that inflation had grown by 6.4% in the past year.
“The excitement right now is the hope that a soft landing will lead to a friendly Fed, but we don’t think that will happen,” Smead said.
He said, “We think inflation will be much more persistent and last a lot longer.” In fact, we think it will last a decade in the U.S. because our demographics are so good.
The Federal Reserve raised its benchmark interest rate by a quarter point at the beginning of this month. Fed Governor Michelle Bowman has said that the central bank will have to keep raising interest rates in order to bring inflation back down to the 2% goal.
Even with the recent rate hikes, Smead says it will be hard for the Fed to stop inflation.
“We have 92 million people between the ages of 22 and 42, and they will all spend their money on necessities over the next 10 years, whether the stock market is good or bad,” he said. “They’ll just go on with their lives.” The economy should be pretty good, and it will be hard for the Fed to keep inflation in check.
The Labor Department said on Tuesday that the consumer price index (CPI), which measures the prices of a wide range of goods and services and is a popular way to track inflation, went up 0.5% from December to January. When you take out food and energy, the core index has gone up by 0.4%.
