January 27, 2023

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Investor “The Big Short” warns of recession and a new inflation peak – E24

Investor Michael Perry sees a cycle of recession, interest rate cuts, and a new peak in inflation. Handelsbanken’s chief economist also predicts a recession in the US.

Over the past six months, house prices in the United States have fallen while the country’s central bank has raised its key interest rate.
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American investor Michael Perry, known for betting against the housing market before the 2008 crash, wrote in A tweet That the level of inflation in the United States will rise further and that the country will be in recession regardless of how the economic phenomenon is defined.

The Big Short investor writes that the US Central Bank will cut interest rates, and the country will again stimulate the economy, so inflation will rise again.

The uncertainty around 2023 in the United States is significant. In the past six months, many economists have predicted that the world’s largest economy will enter a recession. A technical recession occurs when a country’s GDP declines for two consecutive quarters.

Handelsbanken chief economist Marius Gunsholt-Hof also has a recession in the US in his forecast.

They are also priced in the interest rate market, based on an inverted yield curve.

He believes it is not appropriate to look for a rate cut as soon as Perry points out, and says the time perspective is important.

The key interest rate is not a magic tool that can fix inflation overnight. It should be monetary policy persistentpersistentpermanent or persistent to have a real impact on the economy.

Chief Economist Marius Gunsholt-Hof at Handelsbanken.

Soft or hard landing

Hov compares the situation in Norway and Norges Bank, which announced a new interest rate hike in March.

– And after reaching the top, the central bank will probably keep it there for a relatively long time.

The US central bank, the Federal Reserve, wants to keep interest rate expectations high, and has a peak interest rate of 5.25 percent in its forecast.

– But the most interesting thing here is whether we get a soft or hard landing in the US.

It will depend on whether or not the central bank beats inflation in the country and how big the economic downturn is.

Big salary increases

The Wall Street Journal writes that workers in the United States have received the strongest wage increase in decades. This puts further pressure on the country’s still high inflation level.

Wages for workers who remained at their jobs increased 5.5 percent in November from a year earlier, which is a 12-month average, according to the Federal Reserve Bank of Atlanta.

That’s up from the 3.7 percent annual growth in January 2022, and the highest increase in 25 years.

Faster wage growth contributes to higher rates of inflation as some firms also raise their prices to compensate for increased labor costs.

The Fed is watching wage growth closely while it considers future interest rate hikes to slow the economy and reduce inflation.