On Friday’s broadcast of CNBC’s “Squawk on the Street,” BlackRock CEO Larry Fink stated that it will be difficult to reach 2% inflation and one reason is “We have a trillion dollars of fiscal stimulus in the CHIPS Act, the Infrastructure Act, and the IRA.”
Fink stated, “Even when everyone became enthusiastic, it never got to 2.”
Co-host Sara Eisen then asked, “And you don’t see it getting there –?”
Fink responded, “No.”
Eisen then asked, “For how long?”
Fink answered, “I think 2 is a hard number. We have restructured how we frame our economic policy. We have a trillion dollars of fiscal stimulus in the CHIPS Act, the Infrastructure Act, and the IRA. We have very poor legal immigration policies that have restricted, and that is all inflationary in jobs.”
He continued, “And then, the bigger issue is how we think about how we spend our incremental dollars as — we’re spending a lot more money on services. So, if you think about where — service inflation is really the main culprit of high, elevated inflation. We have an aging housing stock in America. So, our homes have more frequency of leaks from older roofs. We have more frequency of busted pipes. This is now translating into a higher elevated insurance cost. Our behavior driving — we have more frequency of accidents than any time, and that means we have elevated car insurance. So, if you look at the most recent inflation numbers, so much of it was insurance, and then if you overlay what I talked about in terms of my — in my chairman’s letter about elongation of life, the cost of elongation of life is going up, and long-term healthcare costs are going up. All those numbers were shown in the inflation number.”
Fink concluded, “So, central banks have a harder time arresting service inflation. A great statistic that my good friend, Rick Rieder, uses all the time, the cost of a pair of Nikes or Adidas is about the same price for 30 years. So, you’d say product prices are virtually unchanged. But the cost of going to a sporting event, the cost of going to a rock concert, to see Taylor Swift is so elevated, six, seven times. And so, it’s a sign that, okay, prices on goods are pretty stable. But what we’re willing to pay to go to a restaurant, to go to a sporting event has been so elevated.”
Follow Ian Hanchett on Twitter @IanHanchett
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