Inflation fears could ease - economist
A conference in Auckland has heard positive forecasts on inflation, with US price rises predicted to fall to 3% in about a year.
Friday, October 28th 2022, 10:00AM
by Eric Frykberg
Other nations would find inflation coming down to a level much lower than they are now.
The remarks came at the annual conference of INFINZ, the Institute of Financial Professionals of New Zealand.
The speaker was a Chicago expert, Carl Tannenbaum, who is chief economist at the American company Northern Trust.
His comments come amid hopes that any fall in American inflation would influence New Zealand, since it would reduce the appeal; of the US dollar to investors and thereby lower its value.
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That would raise the value of the New Zealand dollar and stem imported inflation, which would ease headaches at the Reserve Bank, along with risks of serious side effects for ordinary borrowers.
Tannenbaum told his audience several components of inflation were coming down, such as lower housing costs, which would flow through to lower rents.
He added energy prices were peaking, and there was a search underway for alternatives. These two factors would ease price pressure on the transportation of goods .
‘“In addition, if you are a pure economist, you will link the money supply with inflation and money supply growth has been very slow and may even be negative over the next 12 months,” Tannenbaum said.
“So, looked at from that perspective, there is reason to be optimistic. In 12 months from now we will be looking at inflation rates in most parts of the world that are a lot lower than they are today.
“In my home market, the United States, I can certainly see a case for 3% inflation 12 months from now.”
Tannenbaum conceded a fall in inflation this steep could cause slow economic growth in many places and even bring a mild recession to some countries.
“But I think that is a price central banks are willing to pay because low inflation is so important for long term growth and market performance.”
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