In an interview with Al-Arabiya, the chief economist at Saxo Bank, Steen Jacobsen, predicted that inflation levels in the United States would reach 4% in the long term, ruling that it would decline to the 2% target of the Federal Reserve.
Jacobsen said that the inflation numbers at the present time are better off than the last period.
He continued: “I am talking here about general and basic inflation, but this is due to reasons including the decline in airline tickets by 20%, but the numbers of modern airlines show an increase in prices by between 5 and 7%, according to the new measurement standards adopted.”
He added that medical costs declined by 5% on a monthly basis, but they may witness increases of 5% in October, explaining: “We have a reality that wages will continue to rise and oil prices have witnessed increases in recent weeks. This means that inflation numbers have now reached their lowest level and will start to rise.” Later”.
“In the long term, the inflation rate may reach 4%, and I do not expect it to reach the levels that the Central Bank targets at 2%,” Jacobsen said.
He stated that the Fed is trying to achieve political goals represented in low unemployment rates and stable prices, and it also wants the markets to work well and maintain their stability, and herein lies the danger.
Factors that may drive down interest
And he indicated that previous crises or imbalances in the markets begin when there is a shortage of liquidity, and at the present time the short-term liquidity market is unable to absorb the huge amount of treasury bills that America constantly issues, and the market will become unable to buy these quantities of bills to finance the government. Thus, we will have 3 things: high levels of inflation, a decline in economic growth, and a scarcity of liquidity, and this is what will push the Fed to cut interest rates.
“The probability of a rate cut this year is one in three, meaning there is a two in three ratio of not cutting,” according to Jacobsen.
He stated that for the first and second quarters of 2024, there is a 50% chance of reducing interest rates, explaining: “I think it is a matter of weeks to start hearing about market pricing of large interest rate cuts in the first half of 2024, and in my opinion there is a 50% chance that the Fed will start the cuts.” in the first quarter of next year.
He pointed out that the worst scenario is that the economy will face a state of inflationary stagnation, because that means that input prices will rise and sales will decrease because the consumer will refrain from buying the product, and this is considered a bad mix for the markets, and this is what happens.
Artificial intelligence stocks
As for the S&P500 index, Jacobsen said that our recent expectations were to reach levels of 4455 points, which we are close to achieving now, and if these levels are broken down, I expect to reach the barrier of 4055 points, and this means a decline of about 8% to 9% from the current levels, which is Which may mean a return to the levels at the beginning of the year.
“So we see, as a result, that this year’s performance will be marginal, and it is mainly driven by the shares of the artificial intelligence sector, which rose strongly, and it is now in a correction phase that I expect to continue,” according to Jacobsen.
