Chief economist points to tariff-driven inflation peak

Torsten Sløk predicts rising inflation as Trump's tariffs impact the economy.

Economist warns of inflation peak due to tariffs

Apollo's chief economist Torsten Sløk believes the worst effects of tariffs imposed by former President Donald Trump will be felt later this year. He predicts inflation will peak around November or December, driven by increased prices in consumer goods. According to Sløk, current inflation trends show that consumer prices are already rising. In June, the consumer price index reported a year-over-year price increase of 0.7% for durable goods. He also pointed out that higher wage growth, driven by mass deportations, is increasing costs for businesses, which will likely lead to further price rises. Sløk warned that the Federal Reserve may not cut interest rates until they understand the full impact of these tariffs, raising concerns about a stagflation scenario where inflation climbs while economic growth declines.

The economic outlook raises serious concerns for consumers and policymakers alike. If inflation continues to rise amid stagnant growth, the Federal Reserve will face a challenging situation. Sløk's predictions suggest that a systemic problem could be looming, where traditional monetary policy tools become ineffective. Households may soon feel the strain, as everyday expenses soar while job growth weakens. The specter of stagflation also adds political weight to the already divisive economic landscape, stirring potential backlash from the public and resulting in tough decisions for future administrations.

Highlights

The future remains uncertain as inflationary pressures build in the economy.