Inflation won't come down significantly anytime soon, says one veteran investor.
"The Fed has one tool, the ability to crush demand. That's in the face of inflation that is not transitory, that is not poised to recede anytime soon," Rob Arnott, founder of Research Affiliates, told Yahoo Finance Live.
"In fact I think it's very high odds that we'll finish the year materially higher in inflation than the 9% we have now," he added.
This week's CPI (Consumer Price Index) rose 9.1% — the highest since 1981. The Federal Reserve is expected to continue raising interest rates into order dampen demand and combat inflation.
"This is all in response to a burst of inflation predicated on causes none of which the Fed has any control over. Prices are set by supply and demand," said Arnott.
"To everyone with a hammer, everything looks like a nail," said Arnott. "What about the supply side? Finding ways to increase the supply of goods and services," he added.
Economists have warned of a recession if the Federal Reserve tightens monetary policy too quickly into a slowing economy.
"This is avoidable. There was no reason to push us into a recession," said Arnott.
"They [recessions] don't naturally begin with 2 job openings for every seeker," said the researcher, referring to the tight labor market with 3.6% unemployment.
Last month's strong job market data was seen as a signal for the Federal Reserve to continue on its path to normalize rates.
Ines is a markets reporter covering equities. Follow her on Twitter at @ines_ferre
