EVERYTHING IS GOING SWIMMINGLY: Inflation is ‘far from dead’: Why one large asset manager doubts U.S. can hit 2%.

One of Solloway’s biggest takeaways is that wage pressures across major economies are unlikely to subside by enough to be consistent with central banks’ inflation mandates. He is skeptical that U.S. inflation will settle around the Federal Reserve’s 2% target based on a few assumptions, one of which is that oil price declines seen over the past year are not likely be repeated in 2024. Solloway also questions the need for any rate cuts by the Federal Reserve.

“The risks of an escalation in the Middle East are still higher than anybody should feel comfortable with, and actual military conflict could certainly lead to a sharp, short-term rise in oil prices and another supply shock,” Solloway said via phone on Thursday. Such a supply shock “could lead to a ratcheting up of inflation expectations.”

Following the December U.S. consumer-price index reading on Jan. 11 and Thursday’s initial jobless claims data, “there doesn’t seem to be much weakness in the economic numbers looking out for the next six months,” he said. “Inflation between 3% and 4% is a more-than-likely event, and markets are not prepared for that after the last six months of good inflation readings.”

Once unleashed, inflation can be very difficult to tame. It takes some severe pain to really get the job done but, so far, we’ve only experienced some discomfort.