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Catalyst Corporate | Oct 07, 2022
The final day of Catalyst Corporate’s 2022 Economic & Payments Forum drew to a strong close as CNBC Financial Analyst Ron Insana provided his view on the economy and its current constraints.
Over the years, Insana has become well-known for his high-profile interviews, which have included Presidents Clinton and Bush, billionaire investors Warren Buffett and George Soros and captains of industry, like Bill Gates and the late Steve Jobs.
The Emmy Award-winning financial journalist has also covered some of the most important economic stories of our lifetime in his four decades on television.
At Forum 2022, Insana shared his expert insight as he touched on the many financial implications of today's economy. During his 50-minute closing session entitled, “Navigating the Not-Normal Economy,” he discussed everything from rising rates and current labor market restraints to the repercussions of the Ukrainian war. Insana’s commentary occurred just hours before the Fed’s latest rate hike in September.
It’s no secret that there are concerns around mounting interest rates and inflation paving the way to another recession. Insana likened it to the 1970s, when inflation psychology became entrenched in consumer behavior.
“In the near term, we’re almost universally preoccupied with the inflation rate, risk of recession and whether or not the Federal Reserve goes far enough, or too far, with its policies to bring inflation back in,” he said. Although there are commonalities, Insana believes the Fed is attempting to handle things better than they did a few decades ago. He pointed out, however, that not all comparisons to the ‘70s correlate.
“Fast forward to today, my analysis is radically different. We’re experiencing something much more akin to a post-war environment,” he said. Insana credits post-pandemic pent-up demand, slow-to-return supply and the overall disruption of goods and services for the spike in inflation we’re currently experiencing.
While he acknowledges we may be moving toward a recession, he views this strategy as a “feature,” rather than a “bug,” of current Federal Reserve policy. According to Insana, the Fed is trying to avoid a repeat of the 1970s by front-loading rate hikes and leaving the door open to policy change in the coming months, if needed.
Insana then addressed the pressing question in the room, “What lies ahead?”
“We’re actually in a pretty decent spot,” he said. “The economy is still growing reasonably and the unemployment rate – at 3.7% – is still hovering near 50-year lows.”
He went on to explain the impact today’s labor market shortage is having on the national economy and future forecasts. “There has been an explosion of new job openings, resulting in a total of 11.3 million available jobs and only 5.5 million unemployed workers. And that’s a problem because we’re now also looking at wage inflation, which is bound to follow, given the record-low unemployment rate.”
As for the heightened price of goods, Insana expressed that there are many indicators that “inflation has peaked and will likely roll.” His concern is not that inflation will accelerate, but that the Fed may go too far.
“Historically, when you look at Fed policy, they will break something before they stop,” he said. “Therefore, while possible, the notion of a soft landing may not be probable.”
Shifting focus across the pond, Insana expected Europe to raise rates, as many countries are heavily indebted and inflation is currently “off the charts.” In fact, from a Central Bank perspective, Insana noted that Europe currently has multi-layer problems that the U.S. Fed just doesn’t have.
“We’re seeing many differences compared to the state of our domestic economy,” he said. Insana added that foreign economies have even more variables than the U.S. that could prove problematic down the road, especially as things continue to play out with the war in Ukraine.
Insana admitted that the nation is not accustomed to the degree of complexity attached to the current environment. With more moving parts and less certainty, he said it’s important for institutions to “stop, look and listen to the economy.” When we fail to evaluate all possible economic considerations during times like this, Insana concluded, “Something is likely to come out and ruin your forecast.”
For more insights from Ron Insana’s presentation at Forum 2022, check out his session recording now available on-demand.