Fed Chair Says US Inflation ‘More Enduring Than Anticipated’ — Strategist Predicts 10% Market Correction

Americans are not only worried about future inflation, but they are also dealing with dwindling purchasing power in real-time. Meanwhile, on Thursday, Federal Reserve chairman Jerome Powell plans to address the Senate Banking Committee and discuss inflation. In the remarks pre-published from Powell’s speech, the Fed chair noted that the recent inflation spike may last longer than the central bank anticipated.

If you were to read reports published by news outlets like CNN or Axios, it’s likely the reporter would say something like “maybe we can ignore inflation expectations.” While CNN admits inflation is here, reporters like Dana Peterson blame things like the Covid Delta variant, chip shortages, labor costs, and the cost to rent. Similar to the opinions of politicians and Fed board members, CNN’s Peterson concludes that “inflationary pressure probably will be with us for a while longer.”

Jerome Powell’s speech on Thursday reflects a similar message as he explains to the Senate Banking Committee in his pre-published statements that the rise in inflation may persist for a bit longer. “Inflation is elevated and will likely remain so in coming months before moderating,” Powell’s remarks from Thursday’s upcoming testimony note. The central bank lead blames supply chain issues and further adds:

As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly due to supply bottlenecks in some sectors. These effects have been larger and longer-lasting than anticipated, but they will abate, and as they do, inflation is expected to drop back toward our longer-run 2 percent goal.

At the same time, “long-time market bull” Phil Orlando said on Monday that a 10% correction may take place “over the course of the next five weeks or so.” The Federated Hermes chief market strategist explains that there is a lot of uncertainty around “fiscal and monetary policies” right now. “We’re seeing how events develop and evolve here,” Orlando said during an interview on CNBC’s “Trading Nation” broadcast. The market strategist continued by adding:

On the monetary policy side, inflation has been running much hotter than the Fed and the administration has been prophesying. We think inflation is more sustainably higher. That’s going to result in the Federal Reserve changing monetary policy both in terms of their taper and their interest rate increases much more quickly than they originally told us.

The news follows the recently published statements from the Fed last week and a few members of the Fed board being scrutinized for their stock purchases in 2020. Fed chair Jerome Powell has also been criticized for owning bonds of the same type the U.S. central bank bought during the pandemic last year. Of course, Powell’s pre-published remarks from the upcoming Senate Banking Committee testimony note that the central bank will always step in until the U.S. economy has recovered.

“We at the Fed will do all we can to support the economy for as long as it takes to complete the recovery,” Powell’s pre-published commentary emphasized.

What do you think about the upcoming speech Powell will give to the Senate Banking Committee on Thursday? Let us know what you think about this subject in the comments section below.