Chief Economist: Inflation Has Peaked — Here's What Happens To Bitcoin Next | Stephanie Roth
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What is the main topic discussed in this episode?
There was real concern that AI was going to take over the labor force and we were going to get a big rise in the unemployment rate. And it didn't pan out that way, and I don't think it necessarily will. I think the way it will pan out is people will gradually become more productive. Perhaps some job openings won't get filled because they realize AI can maybe do some of that work. And then new jobs will be created as a result, and it will just result in overall a better economy, better labor force, one where it's more productive, unit labor costs come down, or sort of the costs associated with production, and that's where you get further disinflationary trends.
What's going on, guys? Today we got a great conversation with Stephanie Roth. She's the chief economist at Wolf Research, and we dig into what is the impact on inflation coming from AI, what's happening with the IPO wave, and we get into a little bit of a debate. Are we going to see higher inflation, lower inflation? What's going on at the Fed? Is Kevin Warsh going to tell us what's going to happen in the future or not? There's a lot of nuance in this conversation that I think is really going to strike a lot of you, help you better understand what's happening in your life when it comes to spending, but also what's going on in your investment portfolio. Here's my conversation with Stephanie Roth. All right, Steffi, let's start with talking about inflation.
I think everyone thought inflation was going to go sky high. Everyone was worried about energy prices, the Iran war and a bunch of other things. But now we look and at least the official numbers are turning over and starting to come down. Looks like inflation may have peaked. What's your take?
Yeah, our thought is that inflation was going to peak around this time of year. Then you're going to have a bit of a slowdown in the summer, a couple of things happening. Tariff-related inflation is coming down. The AI-related inflation will probably start to cool. And then even if gasoline prices pick up a little bit from here, the Iran war-related inflation is also going to cool too. So today's CPI data came in much softer than anyone expected. It came in at flat. Forecasts were all looking for 0.2 or above. The Fed was getting ready to potentially hike in July as a result, and that's nearly off the table. So the picture looks a lot better than where it's been. It's not good, but it's looking a lot better than where it's been.
So let's take each one of these. Do you think that there was tariff-related inflation? Because I'm of the belief that tariffs were not inflationary at all. They're actually deflationary.
It shows up in the data. If you look at core goods, they were running over 2% year over year. Typically, we have core goods deflation, disinflation. So we measure that it was adding 50, 60, 70 basis points on inflation, but that's starting to peak because we're now past Liberation Day. So there were goods components that did see price inflation. You could argue it wasn't related to tariffs. I think it probably was. But it was certainly less bad than people thought it would be. The expectation it was going to create this... you know, inflation type spiral and feed through into, you know, across the entire goods sector and then to services like that didn't play out. It wasn't the worst case scenario, but it does appear to have shown up in the data to some extent.
Okay. And then you mentioned AI inflation. My belief is that AI, at least over the long run, definitely is going to be deflationary. But where is the short-term AI inflation coming from?
Yeah. And I agree with you in the long term. In the long term, it should be disinflationary. I'm a big believer in productivity in the long run being a disinflationary force because companies will save money and therefore they can pass it through. For now, you're seeing it show up specifically related to the chip shortage. Mm-hmm. So in computer software and accessories, like some components within the inflation basket are up about 15% year over year.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–3:44
2
Has inflation already peaked and what short-term drivers are affecting prices?
3:44–6:52
3
Were tariffs and AI chip shortages responsible for recent goods price increases?
6:52–20:45
4
Why do consumers feel poorer despite a strong jobs market and rising incomes?
20:45–29:51
5
Can we trust government economic data and what explains recent volatility in surveys?
29:51–45:32
Speakers
2 identifiedMore from The Pomp Podcast
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