Top business leaders in the consumer sector have expressed caution and predicted that inflation would remain high for the foreseeable future. The business does not foresee a return to historical average pricing for the commodities it measures, according to Hugh Johnston, CFO of PepsiCo. Johnston thinks that even if consumer prices are rising and rising costs are being passed on to consumers, the underlying rate of inflation will continue to be high.
Although they are now more optimistic about the future for equities and a less aggressive Federal Reserve (Fed), the majority of CFOs still predict a recession, according to a CNBC study. Several CFOs personally advised their regional Fed presidents to stop raising rates during a recent private discussion among members of the CNBC CFO Council as a result of observable slowdowns in trade volumes, industrial activity, consumer spending, and credit deterioration. However, they worry that the Fed could learn about these warnings only after it is already too late.
This viewpoint is consistent with the idea of “long and variable lags” from monetary policy put out by economist Milton Friedman, which is supported by Tiffany Wilding, Managing Director at Pimco, who thinks a recession is likely. Wilding predicts a slowdown in growth in the second half of the year, which will be impacted by external factors like the start of student loan installments. She also calls attention to a notable slowing in credit expansion, which might be quite problematic given the restrictive monetary policy environment at the moment.
Wilding forecasts an increase in unemployment as the economy deteriorates, which has traditionally been correlated with negative quarters of real GDP growth. As a result, she predicts that a recession is probable. Even yet, Wilding anticipates a “moderate” recession and thinks the July rate rise will be the only one the Fed makes this cycle.
The fears voiced by market analysts who believe that the most recent economic statistics may indicate that the Fed has finished raising interest rates are shared by CFOs. According to Liz Young, Head of Investment Strategy at SoFi, there is a good chance that the Fed would prolong the moratorium on rate rises because of the advancements achieved and the promising future.
On the other hand, San Francisco Fed President Mary Daly is steadfast in her commitment to bringing inflation down to the desired level of 2%.
Corporate leaders’ and experts’ differing perspectives on the economy’s direction, inflationary pressures, and the possibility of a recession reveal lingering uncertainty. The market will carefully monitor the Fed’s decision-making process as it reviews economic data and the effects of prior rate rises.