homevideos Newsworld NewsExpect Fed to keep policy steady in June meeting; believe inflation to be sticky: Port Shelter Investment
Expect Fed to keep policy steady in June meeting; believe inflation to be sticky: Port Shelter Investment
Port Shelter Investment expects Fed to keep policy steady in this meeting, Richard Harris, chief executive at the investment firm, told CNBC-TV18. Harris also said that a rate hike will damage the economy given the extent of outstanding debt.
Port Shelter Investment expects Fed to keep policy steady in this meeting, Richard Harris, chief executive at the investment firm, told CNBC-TV18. Harris also said that a rate hike will damage the economy given the extent of outstanding debt.
Speaking about interest rates, ahead of the awaited June FOMC decision, Harris said, “The Fed is going to do what they have been doing before and it will be steady as it goes. If sometime in the future, they are going to put interest rates up, on this particular day, the market will fall on that. Generally, I think, the market is pretty concerned that an increase in rates is going to do quite a lot of damage to the underlying economy. There’s so much debt out there. And debt, increasing rates plus inflation makes for a pretty heady mixture for a market.”
Given that the US CPI inflation is at 5 percent, which is the highest since August 2008, when asked if he believes with the Fed’s view of inflation being transitory, he said, “I think the Fed is wrong, it has had too much of a dovish view the whole time. You cannot price money, it is a commodity, as people use it as part of business inputs so it has to cost something. As a result, debt is sold because money has been so cheap and now the governments are in on it as well. There’s no discipline so the Fed has been wrong."
Harris further explained, “At the moment they are putting money into the market. That money has to go somewhere so it’s going into the market, assets, on spending, and that is pushing inflation up. I don’t think inflation is transitory, I think it’s very sticky.”
On emerging markets, he said, “Liquidity is going to flow into the emerging markets as it continues to move up, but we all have to remember that some are out there, that is the moment of truth; that moment of the unknown-unknown when people suddenly realise that maybe the Fed isn’t going to continue to put money into the market and not just the Fed, the Chinese central bankers, the Europeans, everybody is putting money into the market to stimulate their economy and all of that has to end up somewhere; at the moment it is ending up in financial investments.”
For the entire interview, watch the video.
(Edited by : Dipika Ghosh)
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