Fed Won't Be Able To Contain Inflation, Expert Warns

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News & Politics

In an effort to fight surging inflation, the Federal Reserve ordered this week the largest interest hike in more than twenty years.

The Fed raised the interest rates by half a percentage point -- after increasing it by a quarter of a percentage point back in March -- with chairman Jerome Powell saying two additional half-point rate increases might be considered soon.

But one expert believes the central bank's efforts are doomed to fail.

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Investor Peter Boockvar, the Bleakley Advisory Group CIO, told CNBC that the Fed simply cannot contain inflation at this point, even as consumers are unable to sustain the ongoing surge.

"It gets to the question: At what point does the consumer blink in the face of these rising prices. On the low-end consumer, they’re already beginning to blink," Boockvar said.

"The consumer is going to call a timeout on spending because of the continued rise in prices. It is inevitable as price matters to the U.S. consumer who loves discounts."

Recession Risk

What are the chances of the economy experiencing a recession?

Powell has made it clear he believes the Fed can avert an economic crisis, but Boockvar disagrees.

The expert told CNBC he expects consumers to delay purchases until inflation decreases or at least slows down.

"This is going to be the most aggressive tightening cycle in 40-plus years between the rate hikes and the shrinking of the balance sheet," Boockvar said.

"Considering how dependent economic activity is to cheap money, how dependent markets have been to cheap money, I don’t see how it’s possible to achieve a soft landing," he added.

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The S&P 500 saw its best day since May 2020 when Powell announced that the Fed is increasing interest rates once again.

But according to Boockvar, this does not mean much. In fact, the bounce will evaporate at some point soon.

"If there are low odds of a soft landing, which means we’re going to have a recession, well that means that earnings numbers are going to have to come down," the Bleakley Advisory Group CIO explained.

Inflation A Major Concern For Americans

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All available data suggests the American people are concerned about inflation.

As The Hill reported, the latest Washington Post-ABC News poll found that a staggering 94 percent of Americans describe themselves as either concerned or upset about inflation.

This has had a major impact on President Joe Biden's political standing -- just 28 percent of respondents in the same poll said they approve of the way he has handled inflation.