A leading economist has issued a warning indicating that Americans, who continue to face the highest inflation rates witnessed in four decades, are unlikely to experience a reduction in prices moving forward. Mohamed El-Erian, chief economic adviser at Allianz, highlighted on CBS’s “Face the Nation” that although inflation is beginning to cool, this change signifies only a deceleration in the rate of price increases rather than a return of prices to the levels observed prior to the inflation spike in 2022 induced by the COVID-19 pandemic.
During the discussion, the program’s host, Margaret Brennan, questioned El-Erian about the possibility of declining prices for everyday essentials such as housing and groceries, acknowledging the Federal Reserve’s imminent meeting to decide on potential interest rate adjustments as inflation nears the 2% target. El-Erian responded by asserting that such a decrease in prices is unlikely to occur. He elaborated that while interest rates and inflation—the increase rate in the cost of living—are expected to decline, a significant reduction in actual prices remains challenging. El-Erian cautioned against assuming that decreasing inflation equates to declining prices, highlighting the political repercussions of such a misunderstanding.
El-Erian explained that although price increases have slowed, with annual inflation reaching a 40-year peak of 9.1% in June 2022 and later decreasing to 2.4% in September, overall prices remain approximately 20% higher compared to four years ago. This sustained price level continues to be a key concern for voters in the upcoming presidential election, where both Democratic candidate Vice President Kamala Harris and Republican former President Donald Trump have presented economic strategies designed to alleviate inflationary pressures and spur economic growth.
Vice President Harris has proposed increased government spending focusing on investments in small businesses and tax credits for families with children. In contrast, former President Trump has advocated for deregulation in energy production and higher tariffs to address the national debt. Despite the October employment report, which fell short of economists’ expectations, El-Erian maintains that the economy is performing robustly. He mentioned that recent economic distortions are largely attributable to strikes and hurricanes and emphasized that maintaining economic strength and adjusting for future prosperity are critical priorities for the next administration.