Billionaire Chamath Palihapitiya believes that persistent inflation and high interest rates are here to stay, at least until the end of the decade.
In a new episode of the All-In Podcast, the venture capitalist says that sticky inflation will likely force the Federal Reserve to keep interest rates high in the coming years.
According to Palihapitiya, the government’s effort to control inflation via a hard landing or a sharp economic downturn will likely not yield the expected results now that China has made moves to stimulate its economy.
“What have I said like a broken record? Rates are going to be higher than you want, and they’re going to be around for longer than you like. Now (Fed Chair) Powell is basically telling you the same thing.
We’re almost at the end of I think the bottoming though. I don’t agree that… there’s going to be a hard landing in Q4. And the reason there’s not going to be a hard landing is you just saw China today basically say we’re going to start to rip in trillions of dollars. They’re going to stimulate the economy. You can’t have a hard landing when China’s printing trillions of dollars – not possible.”
According to the Wall Street Journal, China cut three policy rates last week as its government considers issuing $140 billion in bonds to spur economic activity.
Palihapitiya says that the Federal Reserve will likely have to impose additional rate hikes to keep inflation under control should the Chinese government decide to introduce a fresh round of stimulus packages.
“I think what Powell was forecasting is that if China starts to basically turn on the money printer and go through a huge spate of quantitative easing, it’s going to just inflate everything because they’re just a critical artery to the world economy and so you just have to get prepared for rates just being sticky and inflation being sticky, and I think that’s probably the most reasonable base case for the rest of the decade.”
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