With Inflation At Highest Since 1982, Pressure Mounts On Fed To Raise Interest Rates

After last week’s report from the Bureau of Labor Statistics, which showed last month’s year-over-year inflation rose to 6.8%, Morgan Stanley CEO James Gorman is now pushing for the Federal Reserve to increase interest rates.

The inflation-increase is the highest year-over-year increase since 1982. This, in turn, is causing many normal utilities and household good costs to skyrocket, while incomes remain stagnant.

Speaking on CNBC, Gorman said “We are heading toward a rising interest rate environment. I felt the Federal Reserve would be better off storing away some of the rate increases, so when the inevitable downturn comes, you’ve got some ammunition to fight with.”

Gorman went on to note how normal interest rates may be the result of extensive interest rate hikes, “If I were the Fed, I would start moving earlier rather than later. Store away some ammunition and accept the reality,” he said.

Gorman also said, “I don’t think it derails the economy. This is what you need, you need balance in the economy.”

On the heels of the Bureau of Labor Statistics report, Former Treasury Secretary and National Economic Council director said “I cannot understand why so many in Admin & out cling to the idea that inflation is caused by bottlenecks & will soon recede to normal levels. Of course, there is uncertainty but the idea that inflation will revert soon to levels anywhere near Fed’s target looks like a long shot.”

He went on to explain, “Given housing prices and tightening labor markets, there is no compelling reason to expect major deceleration in inflation. But, even if inflation subsided to .2 percent a month, the annualized inflation rate would be 6.5% in March 5.1% in June and 4.0% before the election in September.”

Summers said, “My guess is barring a major recessionary or financial shock next fall, headline inflation will round to 5 percent. We are beyond where the Vietnam inflation took us but still have plenty of time to stop a late 1970s situation from developing if we have the will.”