Jim Tyson | Getty Images News | Good pictures
According to Steven Whiting, chief investment strategist and chief economist at Citi Global Wealth, the global economy does not need a „collapse” to bring inflation back to target and return to sustainable growth.
Major economies have proved surprisingly resilient to sharp interest rate hikes by central banks over the past two years. This is particularly evident in the US, where a recession has so far been avoided and the labor market remains strong.
Talk has now turned to rate cuts as growth slows, with inflation on a downward trajectory toward central banks' targets.
Wheating told CNBC's „Squawk Box Europe” on Monday that the global economy doesn't need an „economic collapse” to curb inflation.
„We had one big shock — one pandemic, one recession. We don't need two recessions to finally cure our inflation problem,” he said.
„It's holding up some parts of our economy right now – manufacturing and trade declines are happening around the world – but these could come down within the year.”
US inflation was 3.4% year-over-year in December, above the Federal Reserve's 2% target, but down significantly from a peak of 9.1% in June 2022.
Investors will be closely watching Friday's personal consumption expenditures (PCE) inflation numbers, the central bank's favorite metric, for more clues as to when the central bank will start cutting rates.
Meanwhile, a preliminary estimate of fourth-quarter gross domestic product is scheduled for Thursday, with the economy expected to grow 1.7%, its slowest rate since a 0.6% decline in the second quarter of 2022.
„With this period of slower global growth and slowing job growth in the U.S., we think we can go through a period of healthy growth, especially if we look into next year and beyond, and that's the business this year for investors,” Wheating said. .
He emphasized that while the economy needs to do more, this is not the result of „real warming” or a prolonged „boom” but a substitute for excessive government fiscal stimulus related to pandemic recovery. Will continue again.
„If you look at the money supply in the U.S., it's down 4% in the last year. Look at the 1970s, it was almost 10% growth for the whole decade, and core prices were going up 14% every year — that's … Persistent inflation,” Wheating said.
„The story of all this government spending coming and going — surges in supply and demand, consumer spending between goods and services going up or down by 30%, during a pandemic — that's not the environment we're in anymore.”
„Oddany rozwiązywacz problemów. Przyjazny hipsterom praktykant bekonu. Miłośnik kawy. Nieuleczalny introwertyk. Student.