Taps Coogan – August 3rd, 2021

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Evercore ISI Chairman Ed Hyman, one of the fathers of modern market research and perennially ranked as one of the top institutional economic advisors in the world, recently spoke with Bloomberg to discuss his outlook for the economy and inflation. Notably, Mr. Hyman sees inflation running hotter than expected and only settling back to 3% by 2023 or 2024.

If you have trouble seeing the video, try here.

Some excerpts from Ed Hyman:

“I think inflation is going to be more than expected. We do a lot of work on rents and they are surging and that’s 40% of the Core CPI and 20% of the Core PCE. So rents are going to be running around 6%, so you can do the math on what that does, and wages have been going up and we just did a survey that says pricing power is going up. So, inflation is likely to run ahead of expectations, but I think it’ll settle out at around 3% in around 2023 or 2024…”

On the prospect for the Fed tightening:

“I hate to state the obvious… but they’re going to move… They’ll start to taper. It’ll take about a year to get down to zero and then they’ll start to raise rates. Neither of those are tightening, their just less simulative… I think the Fed, right now, is probably behind what I see…” 

All in all, Mr. Hyman seems pretty sanguine about the prospect of inflation running ahead of 2% of several years. He doesn’t see the Fed ending QE until late 2022 or early 2023 and feels that the market has already acknowledged that the Fed will begin tapering this winter.

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