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Does the Economy Need More Inflation?

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  • Description

    Anthony Valeri of LPL Financial gives his outlook for inflation.

  • Duration 3:55
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We certainly won't well this morning we got -- latest CPI print April's Consumer Price Index coming in flat.

After three months -- price increases following oil and gas prices -- eased inflation pressures.

-- perhaps inflation is just the Anthony Valeri fixed income investment strategist for -- -- financial joining me an eighth street see you let's take on -- rate of inflation right now and couldn't use -- the economy is to just a little more.

-- -- I think the inflation is is still positive that the slowdown we saw actually -- from two point 7% over all the 2.3 percent was largely expected due due a fall in energy prices.

The core rate which strips out more volatile energy was unchanged at 2.3 percent so all and all you do need a little inflation.

For the economy to move -- I think that's a positive it is however.

Not weaken -- for not.

-- decelerate enough perhaps to push the Fed -- doing QE3 or another round of large scale bond purchases.

-- something I think they're out what we need at this point to the economic cycle in terms of inflation.

Do me a little more exit to give the economy a little bit of a boost because as you know it is just stagnant and nothing seems to be working especially look at the message.

You know the treasury yields the ten year -- seven now.

The ten year is being strongly influenced by Europe I wouldn't it's a healthy economy quite frankly here in the US is taking a back -- to.

Events in Europe really got a point to the jobs market I think that's gonna be the catalyst to higher inflation.

We have to see some better improvement there we'll get another read this Thursday with weekly jobless claims.

But we need better for improvement on the job front to get movement on the economy inflation -- reflect that once that happen.

You mentioned the Fed.

Does this give the Fed this repeat this report today on if I'm on that consumer inflation war room or less room for another round of -- I don't think you get some enough room -- it's moving in the right direction but I I think the Fed is going to see have to see either weaker inflation a much weaker.

Economic data so -- but it's not -- it's not convincing enough.

For the Fed to conduct another round -- purchases.

We think the treasuries hold their gains here.

Based on Europe I think the key here for treasuries really is is what happens probably Thursday with the the Spanish bond auction.

That'll be a good sign of demand given the weekend events the falling apart if you all of that the attempts to him.

I have a coalition government in Greece looks like we're we're gonna have new elections in the middle of June.

As long as Greece remains as unsettled as -- that's a risk to the eurozone.

OK so getting back to this topic of inflation this idea that because the European sovereign debt crisis one solution Serb you know say no thanks to austerity.

Is to inflate that debt away rights have got the central banks in Europe.

Printing money who knows what happens US were still regardless QE3 extraordinary.

Accommodative do you think that inflation could rear its ugly head if you will and quick and dirty fashion.

Not in a quick and dirty facts I think it is a longer term risk -- no doubt about it the Fed's current policy -- Our inflationary overtime to the EC -- policies to inject liquidity could be inflationary but they.

Have not been as aggressive as the US fed again both of those are long term.

Inflationary but in the meantime that cash is quite frankly sitting on bank balance sheets and in not being reinvested into the economy some not and an out of risk on.

OK and and that's also a problem as well so do you think would you Anthony kind of lower your growth outlook for the US because of those circumstances are just describing and if you look at where US rates are.

Regardless of what's influencing them.

Well.

We -- -- we came into the year with a below trend that the outlook on the economy to the two and a half percent GDP growth we think it comes in close at a 2%.

We don't see a recession.

But again economy should grow historically has grown and about a 3% average annualized rate we think we're gonna have a sluggish kind of model through environment for this year at 2%.

Yes that's how it's been Anthony Valeri thanks for your time appreciate it.

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