While several market strategists and analysts expect US inflation in 2023 to be considerably lower than last year, Michael Wilkerson, founder of Stonewall Advisors believes inflation could rise to 12% by the end of this year. The country’s inflation rate has cooled over the past seven months, but Wilkerson argues that the Federal Reserve will “run out of firepower.”
Michael Wilkerson of Stormwall Advisors believes the U.S. will see “another round” of inflation
Over the past two months, many reports have stated that “inflation has peaked” and the U.S. Consumer Price Index (CPI) has fallen for seven consecutive months from its high in June 2022. In a recentinterviewbetween Kitco News anchor Michelle Makori and Michael Wilkerson, founder of Stormwall Advisors, Wilkerson expressed his view that U.S. inflation is poised to surge again. While acknowledging that his view is in the minority, Wilkerson emphasized that “inflation does not move in a linear fashion, but rather we see some degree of cyclicality.”
In an interview, Wilkerson said, “I don’t think we’ve seen the end of inflation and I think it will spike back up.” He said, “I can’t say exactly what will happen by the end of 2023, whether it’s 8% or 12%, but I think it’s possible that we could be back in that range by the end of this year.
Wilkerson explained that the M2 money supply has grown since 2008 and swelled further during the Covid-19 pandemic. As an executive at Stonewall Advisors and author of “Why America Matters: The Case for a New Exceptionalism,” Wilkerson argued that an increase in the money supply will inevitably lead to higher prices, which has been proven by historical patterns. He believes that from a policymaker’s standpoint, inflation is the “lesser of two evils” and the preferred option.
Wilkerson told Macori that “the Fed will run out of firepower.
“Ultimately, it’s a tradeoff between keeping inflation down, slaying the inflationary dragon, and allowing recession and unemployment to rise. And governments, always and everywhere, choose inflation,” he added.
However, some analysts and economists believe that inflation will decline this year. For example, Cambridge University economist Mohamed El-Erian expects inflation to be “sticky” at around 4% by mid-year. Adam Posen, director of the Peterson Institute for International Economics and a former Bank of England official, expects U.S. inflation to reach the 3% level by the end of 2023.” We’ve factored in the fact that we’re going from the high inflation we’re at now to 3%,” Posensaid at the end of December 2022.
