Taps Coogan – 28th of August 2020

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Bleakley Advisory Group CIO, Peter Boockvar, recently spoke with CNBC to caution central bankers from rooting too strongly for inflation, given the significant supply disruptions in the economy and the potential for a quick recovery in demand if an effective vaccine is found.

Some excerpts from Peter Boockvar:

“Right now we are actually seeing… cost push inflation where, because of Covid when we shut down so much capacity for a few months, it’s taking time to actually bring that back. So you are seeing FedEx and UPS a few weeks ago, for example, talking about adding surcharges to every single package that’s being shipped this Christmas. You have used car prices that are through the roof because… automakers basically shut factories for a few months… You’ve seen lumber prices that have essentially doubled over the last couple months…”

“…On the demand side, when you get that vaccine, I think you are going to get a big pickup on the demand side where people try to go back to the way that they were living beforehand… That’s going to lead to higher inflation than the Fed wants… Any central bank always has to be careful of what they wish for when they want higher inflation because higher inflation is typically associated with a higher cost of living, reduced purchasing power for the average consumer, and higher interest rates and… that’s not the kind of environment that we should be rooting for…”

One would think that these points would be obvious, and they are to normal people, yet somehow it has become a matter of official monetary policy to push inflation not just to 2%, but above 2% for an extended period.

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