Dr. Adam Posen Talks CPI, Global Economic Outlook
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Hello, I'm Stephen Carroll. I'm in Brussels, where many of Europe's biggest decisions get made.
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On Apple, Spotify, YouTube or wherever you get your podcasts. We're going to stay, Tim, on the U.S. economy. We're going to broaden out as well, especially when it comes to geopolitics and the global economy, something we talked about with our Stu Paul yesterday.
We've got a great voice to do this. Dr. Adam Posen joins us, president of the Peterson Institute for International Economics, joining us this afternoon from Washington, D.C. Before we broaden out, Dr. Posen, I want to talk about the U.S. economy coming off of that inflation print that we just talked about with Mike McKee. Where do you see the U.S. economy heading? Well, thank you for having me back.
The main thing I think your investor listeners should be thinking about is that if you're plus or minus 0.1, 0.2 from expectation on any given month's print, it's not real information. I mean, nobody has their expectations that precise. So you have to look at the bigger stories. And to me, the bigger stories in the U.S. are that we have a labor market that isn't cratering as people used to worry about, that has solid retention of employment, not huge employment growth, but solid retention. We have potentially some very stimulative fiscal policies coming down the pike in that the Republican majorities in the Congress may give President Trump checks to hand out ahead of the midterm elections in November.
They may, I hope they will, restore some of the funding for Obamacare insurance subsidies that were taken out in last year's bill. And we've got in the end a bunch of things on the tariff front and even more so on the anti-migration front that are percolating through the economy. And people were premature to say, oh, it all must have happened by now or it won't happen. That's not right. It takes time for businesses and households and migrants to make decisions. So I'm with Mike. I'm with a lot of people. I think the pricing of three Fed cuts this year is much too many.
So this explains, or I'm assuming this kind of explains, Dr. Posen, that you and Lazard, CEO Peter Orszag, of course, formerly director of the Office of Management and Budget and director of the CBO, you guys put out a column in January that the Fed's 2% inflation target could be totally left in the dust. You think inflation could, quote, surprise to the upside, potentially exceeding 4% by the end of 2026. Is it because of what you just laid out in terms of tax cuts, federal government spending? These are things that are going to be stimulative.
Stimulation, Carol, exactly. And Peter and I, and I was glad to co-author with Peter because he knows the fiscal stuff. So if he and I agree that these are real likely risks to more stimulus out of fiscal, I'm willing to buy it or willing to sell it, actually. But I think the other things that we're talking about is the lagged effect of tariffs and anti-migration. I wrote about this in a column for Businessweek magazine earlier this month. I think we're talking about, and Peter points to from his perch at Lazard, various corporate CEOs like at Amazon and or the beige books from the Fed that say companies are only just now passing through some of these adjustments.
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