Two reasons why the inflation spike will be temporary

On this episode of Influencers with Andy Serwer BNY Mellon Wealth Management CEO Catherine Keating gives two reasons on why the increase in inflation will not be a long term issue.

Video Transcript

CATHERINE KEATING: Obviously, we are still in the middle of a global pandemic. And so we worry very much about health and financial health. But also, there is more stimulus than we've ever seen before. And we all have a new vocabulary that we've developed through this pandemic, new words, you know, work from home or jabs.

Well, one of those new words is the one that Chairman Powell uses all the time, which is transitory, right? Because inflation and the needing to raise interest rates is often what ends an economic expansion cycle. And so, we all expect to see inflation rising. Actually, the data yesterday told us it is rising and maybe even a little more than we expected.

But we would join Chairman Powell and say we do think it's going to be transitory, that we'll see it this year as we rebound from the lows of last year, but that then, it will begin to abate. And we think it will abate for a couple of reasons. One is demographics. And this is not new to the pandemic. The world is aging, right? The major economies of the world, whether it's the US, Europe, China, Japan, all aging. And aging economies tend to be a bit deflationary.

There are other reasons. Debt tends to be a bit deflationary, right? You have more public debt. Think of your own household. If you have a lot of debt and you're paying off debt, you're not investing for other things. So there's more public debt. There's actually more private debt than there was because of the low interest rate environment that we've had over the last decade. So we think there are some things that could be a bit deflationary going forward. And so we are in the camp, we do agree with Chairman Powell that we will see inflation. But it'll be transitory.