Much Higher Interest Rates for Much, Much Longer || Peter Zeihan

Inflation Trends

Peter Zeihan examines the current inflation trends and the Federal Reserve's response. He highlights that the Personal Consumption Expenditures index, the Fed's preferred measure of inflation, has risen to 2.7%, contrary to expectations of a decrease 1. This uptick is attributed to shifts in consumption patterns due to COVID-19, which required supply chains to adapt over an 18 to 24-month period.

Most of the inflation story that we've been experiencing of late has been COVID related.

--- Peter Zeihan

Zeihan notes that while inflation has decreased from its peak of 9% to around 3%, it has plateaued, suggesting that the current inflation rate may be the new normal unless the Federal Reserve changes its mandate 1.

   

Interest Rates

In discussing future interest rate expectations, Zeihan explains that the Federal Reserve is unlikely to cut rates in the near future. Despite Wall Street's anticipation of rate cuts to stimulate the economy, the Fed remains firm in its stance, potentially increasing rates over the next two to five years 1. This decision is partly influenced by the Fed's view of Wall Street's past irresponsibility with capital inflows, contributing to financial crises like the dot-com and subprime crashes.

If anything, you should expect them to go up.

--- Peter Zeihan

Zeihan suggests that the Fed's actions may reflect a desire for independence from Wall Street's expectations, focusing instead on broader economic stability 1.