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Inflation | Munk Debates

SEASON TWO - EPISODE #71

Inflation

Be it resolved, the Federal Reserve needs to fight inflation aggressively or risk its own credibility.

Guests
Mohamed El-Erian
David Rosenberg

About this episode

Pandemic government spending, labour shortages, rising gas prices, and supply chain bottlenecks have led to a surge in inflation and some of the fastest price gains for a broad range of goods and services in the last 40 years. In response, some financial experts expect central banks to raise rates multiple times this year and start selling off some of the hundreds of billions in bonds they purchased during the pandemic. The threat of entrenched inflation supposedly requires central banks to respond aggressively and raise interest rates repeatedly over the course of 2022 despite tightening financial conditions and seemingly slowing economic growth.

Other economists disagree, insisting that central banks have responded appropriately by not taking drastic and unnecessary action that could cause a recession. Long term inflation pricing in the bond market suggest that the inflation threat is a short-term problem and small rate increases now can more than offset the risk of runaway, long-term inflation. The bigger risk is an economic slowdown or outright recession brought on by central banks raising rates too fast while selling off hundreds of billions in bonds into a global debt market that will struggle to absorb record government deficits.

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Guests

Mohamed El-Erian

“The Fed has to act and act boldly. Already it has lost some credibility, and if it delays more, it will lose even more credibility and have very few policy options that are attractive.”

Mohamed El-Erian

“The Fed has to act and act boldly. Already it has lost some credibility, and if it delays more, it will lose even more credibility and have very few policy options that are attractive.”

Mohamed El-Erian is the chief economic adviser at Allianz, the corporate parent of PIMCO, where he served as CEO and co-chief investment officer. Allianz is one of Europe’s largest financial and insurance companies with more than $2 trillion euros under management.  Mohamed chaired President Obama's Global Development Council, is a columnist for Bloomberg View and a contributing editor to the Financial Times. He is the author of the  New York Times bestselling book The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse. A second edition of the book, with a new introduction by Mohamed, was published this month by Random House.

David Rosenberg

“My view is that inflation is going to ultimately decline of its own accord and the historical record proves that.”

David Rosenberg

“My view is that inflation is going to ultimately decline of its own accord and the historical record proves that.”

David Rosenberg is the President and Chief Economist & Strategist of Rosenberg Research & Associates Inc., an economic consulting firm he established in January 2020. He and his team have as their top priority providing investors with analysis and insights to help them make well-informed investment decisions. 

Prior to Rosenberg Research, David was Chief Economist & Strategist at Gluskin Sheff + Associates Inc. from 2009 to 2019. From 2002 to 2009, he was Chief North American Economist at Merrill Lynch in New York, during which he was consistently ranked in the Institutional Investor All-Star analyst rankings. Prior thereto, he was Chief Economist and Strategist for Merrill Lynch Canada, based out of Toronto, where he and his team placed first in the Brendan Woods survey of Canadian economists for ten years in a row. 

Mr. Rosenberg is a frequent contributor to most major financial newspapers and publications in North America and makes regular TV appearances in the financial media. He received both a Bachelor of Arts and Masters of Arts degree in Economics from the University of Toronto.

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