The market awaits the Fed’s final rate decision of 2023 and Chair Jerome Powell suggests that any decision made will be based on data. October's Consumer Price Index (CPI) — one of the inflation indicators that gauges the state of the US economy — is due out this week
Lakshman Achuthan, Co-Founder of the Economic Cycle Research Institute, joins Yahoo Finance Live to take a closer look at recent forward-looking data. Achutan predicts inflation may stay higher for longer as economic patterns point to the fact that the US may be in a "cyclical breakdown."
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Video Transcript
- Data, data, data. As markets attempt to anticipate the Federal Reserve's final rate decision of 2023, Chair Power hinted last week that any decision will ultimately depend on data. The October CPI, due tomorrow morning, the first in a heavy slate of US indicators, providing a glimpse into the US economy's performance here, and much needed clarity about the state of the Fed's inflation fight. So what does a closer look at October's data thus far tell us about the state of the economy, and what can we expect going forward?
For all those questions and much more, we've got, joining us in studio, Lakshman Achuthan, who is the co-founder of the Economic Cycle Research Institute. Great to have you here in studio with us. First and foremost, you as we think about what is next to come, and even as we've heard, more economists from some of the largest banks here in the US spell out what they're looking for in 2024, 2025, as far out as then even, we still have the here and now of the Fed's decision to come at their next meeting.
LAKSHMAN ACHUTHAN: Yep. Yep. Yep. My gosh, I just laughed. I'm sorry, when you said 2025 because who knows?
- Exactly.
LAKSHMAN ACHUTHAN: Right. I mean, it's hard to know what's happening in the next month, as you say. So looking at the, and we all are just trying to look at the latest data and analyze it in some sort of framework to say what do I expect. Should I lean this way or lean that way?
- Does it feel like they're leaning too much into data at this point. That is rear view mirror. That's backwards.
LAKSHMAN ACHUTHAN: Yeah. Well, they have to, right? So there's a lot of monitoring going on, right? So it's a good point what you're making. That's backward looking coincident data, a lot of nowcasting. So you can have, I just looked at all these credit cards or swipes so I know what's happening. Well, actually you know what just happened, right? And to your point. So to forward looking, you need some sort of framework.
And there'll be big econometric models that'll say, well, if you push this, then that should happen, or if I survey you, and you say something, maybe you'll actually do it. I don't know. All of these things we're trying to figure out. So from our vantage point, when cycles-- what we're looking there are just patterns. There's free markets have upswings and downswings. They're messy.
They do not act the way you expect them to act. Sometimes they go a lot further because we get really excited, and we get really upset. And we do both of those things, we, the collective we. And so here we are. I'm pretty darn sure we're in a cyclical slowdown, OK. As best as I can tell, looking at backward data, current or forward looking data. It's still continuing, and the Fed, separate from growth, which is slowing, which is what they want, right? Is concerned about inflation, right?
So what's going on there? That is also cyclical, and that is slowing, and the market is saying, OK, we've done it, right? The slowing is good. We're good to go. It should be kind of clear skies pretty soon once we get over this little valley here. And the forward looking data on inflation is saying, well, directionally, sure. It is slowing but are you going to get to where you want to go quickly?
Well, that could take a while, and that's the higher for longer that we've been having this back and forth discussion on, to your question just now. Sorry, it was a long answer, but the thing is probably still a little more higher for longer.
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