Jeffrey Gundlach says inflation will stay above 4% through 2022

Jeffrey Gundlach, a billionaire bond investor, said Friday that consumer price inflation is likely to remain high through 2021 and stay above 4% until at least 2022.

Citing pressure from shelter costs and rising wages, the head of DoubleLine Capital told CNBC that he sees current inflation as not temporary and instead likely to continue into the future.

“We believe that 2021 will almost certainly end with a 5 index [consumer price index]It’s going up in the next few readings, thanks primarily to the price of energy, Gundlach said in CNBC’s Halftime Report. “And we don’t think inflation will fall below 4% any time in 2022.”

His comments come with the Consumer Price Index, which measures a broad basket of consumer goods prices, rising at an annual rate of 5.4% when food and energy costs are included, the fastest in 30 years. The Fed’s preferred metric, which measures personal consumption expenditures excluding food and energy, is 3.6% on an annual basis, well ahead of the central bank’s 2% target.

Federal Reserve officials insist that the current price increases are temporary and driven by supply chain shocks, extraordinary demand for goods for services, and labor shortages, all linked to the Covid-19 pandemic.

And while Gundlach acknowledged that some increments, such as lumber and some other goods, are temporary, others are not.

One factor he cited was shelter costs, which make up about a third of the CPI and have been rising steadily this year, though not at a pace equal to the main increase.

“We will almost certainly face persistently high inflation thanks to a higher shelter component, and possibly wages as well,” he said.

The result, he said, was negative real interest rates as government bond yields remained low while inflation was rising. He described negative rates as “largely unattractive” from an investment point of view.

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