High inflation may linger for decades with wars set to usher in an era of deglobalization, billionaire investor Ken Griffin says
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- High inflation could hang around for decades, according to Ken Griffin.
- The billionaire investor believes the pandemic and conflicts will usher in an era of deglobalization.
- The Federal Reserve will likely have to keep interest rates high to suppress soaring prices, he added.
Higher-than-normal inflation could be here to stay, according to billionaire investor Ken Griffin.
The Citadel founder said late Wednesday that soaring prices could become entrenched as COVID-19 and conflicts in Europe and the Middle East usher in an era of deglobalization.
"There's many trends at play right now that are pushing us towards deglobalization," Griffin told the Bloomberg New Economy Forum in Singapore, pointing to the pandemic disrupting supply chains and European countries losing access to Russian natural gas due to the war in Ukraine.
"And with that is certainly a trend towards higher baseline inflation," he added. "It could be for decades."
Inflation soared across much of the developed world last year, prompting central banks to start raising interest rates in a bid to tame soaring prices.
It hit a four-decade high of 9.1% in June in the US but has since cooled toward the Federal Reserve's 2% target following aggressive tightening between March 2022 and July this year.
Griffin predicted that higher interest rates will now become the norm, with policymakers forced to keep borrowing costs elevated to maintain their target inflation rate of about 2%.
"There's a variety of reasons you want a low level of background inflation – it helps to lubricate the wheels of commerce," he told the Bloomberg Forum. "That number the Fed has committed to is 2% – they're gonna fight pretty hard to keep that as the target, for a litany of good reasons."
Griffin added that one consequence of higher rates could be more concerns about the US government's ability to repay its $33 trillion mountain of debt, which will become more expensive to service due to Fed tightening.
"We're going to see higher real rates, and we're likely to see higher nominal rates and that will have a real implication on the cost of funding our enormous deficit," he said.
"The US has $33 trillion of debt outstanding – we didn't plan for an era of higher rates when we went on the spending spree that created a $33 trillion deficit."
from Business Insider https://ift.tt/APKBkUx
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