afternoon. a new inflation alarm black rock think prices to rise several years mainly because of kinks in the global supply chain. now there is greater recognition that inflation is not transitory. it is probably with us for a number of years. and it s the type of inflation that i don t believe the federal reserve has the policy or the tools to do much with it right now, and i m personally not blaming the federal reserve for where we are right now, but i believe most of the problems we re living with today are more policy generated and supply generated. he says demand, right, has shot back up to where it was before the pandemic, creating shocks to the supply chain. that means supply can t meet demand and prices go up. and the fed is the official inflation fighter. he s right about that, but he says the fed doesn t have all the tools to fix, for example, a global supply chain that has just been wrecked by covid lockdowns and huge demand
procter & gamble ceo chamber. thank you, steve. very handsome. he is. i love the room. erudite. steve rattner, thank you so much, as always. kids love steve, go ahead. i was just going to say, you know, the suit is supposed to fit the man, the man fits the suit. i m acting out my or putting the backdrop to me that i deserve, one way or another. know your value. as bill shakespeare would say there you go, know your value. thank you, steve. all the world is a stage. i feel like steve s last point there is kind of really, a little bit foreshadowing of potentially really tough times ahead for the economy. listen it is hard not to deny this. well, inflation continues to explode. it doesn t look like it is going to slow down. the fed is going to have to do what the fed doesn t want to do, and they re going to have to jack interest rates up a lot more than they ve even talked about now.
our future? certainly, stagflation was the word we used in 1973 when we had an oil embargo and took an already inflationary economy and collapsed demand. we had a rise in the unemployment rate, even as inflation was accelerating. some of the things we see out there, some things like the food inflation that s been exacerbated and energy inflation exacerbated by the war in ukraine, and actual food shortages we ll face over the summer. those are things that can get embedded in inflation and in people s behaviors. what the fed is trying to do is stop it from becoming the norm for us to expect prices to go up and have to make these really tough choices, even at the grocery store, even though the fed doesn t have a lot of influence over things like whether or not we have food shortages and all of the factors affecting that, including climate change. they have to deal with not allowing that getting impeded in our behaviors. that means hitting the brakes
have a bigger run-up in both rents and prices because i m expecting inflation to be pretty rough. it s already starting to affect us at the gas pumps, it s affecting us at the grocery store, and assets that produce income like real estate are being affected significantly as well. so when i see this coming, when i see, hey, my money s going to be worth less, i actually want to be buying more real estate. that s really interesting. definitely making me think as well. really quickly, i want to get your take on what economics professor justin wolfers told me last night. you can make mistakes in either direction. so it s just as likely the fed won t move that hard, won t move that fast, and, in fact, the economy will keep motoring on a little too quickly. so the point here is simply that the balance of risks is remarkably balanced right now. so if the fed doesn t move hard enough and things keep spiraling, what are does that mean for the housing market? well, it will have a
brakes on the economy. the fed doesn t have that luxury because inflation is high. consumer prices are rising at the fastest pace we ve seen in 40 years. families are facing sticker shock on everything from gasoline to used cars to food, and of course shelter, and so the fed is being forced to step in like the firefighter and try to put out this inflation fire right now, and they re really being forced to take more significant steps than normal. now, the fed deserves credit, i think, for, you know, helping to save the economy from covid. there was no covid financial crisis in part because the fed had all these emergency actions, and yet, the fed has come under some criticism for arguably being too late to take away that support. i mean, the economy doesn t need emergency support right now, and so that s where the fed finds itself in this really tricky place because they have to catch up to inflation. no one doubts they have the ability to do that. they could raise interest rates as hig