• Billionaire Chamath Palihapitiya predicts that persistent inflation and high interest rates will remain in place until the end of the decade.
• The Federal Reserve may need to impose additional rate hikes to control inflation, should China decide to introduce a fresh round of stimulus packages.
• Palihapitiya believes that due to China’s decision to print trillions of dollars, a hard landing in Q4 is unlikely.
Billionaire Chamath Palihapitiya believes that sticky inflation and high interest rates are here to stay, at least until the end of the decade. He discussed this on a recent episode of All-In Podcast. According to him, the government’s effort to control inflation via a hard landing or a sharp economic downturn will likely not yield expected results now that China has made moves to stimulate its economy.
China Stimulus Packages
According to Wall Street Journal, China cut three policy rates last week as its government considers issuing $140 billion in bonds for economic activity stimulation. Palihapitiya said that if China starts quantitative easing by printing trillions of dollars, it would inflate everything and therefore, the Federal Reserve would have no choice but keep interest rates high and stick with inflation for the rest of the decade.
Palihapitiya thinks Fed Chair Jerome Powell was forecasting that if China starts quantitative easing by printing trillions of dollars, then additional rate hikes from Federal Reserve might be necessary in order to keep inflation under control.
Palihapitiya concluded his statement by saying that sticky inflation and high interest rates are here for longer than we like it and so we should prepare for it throughout the rest of the decade.
The takeaway from this article is that investors should prepare themselves for higher than usual interest rates and persistent inflation throughout this decade due to Chinese government’s decision to introduce stimulus packages which could lead Federal Reserve towards raising their own rate hikes in order maintain economic stability.