U.S. inflation predicted at 6 percent by autumn 2008!
NEW YORK - July 30,
2008 - Inflation in the United States could hit 6 per cent by the fall, CIBC
World Markets' chief economist said on Wednesday.
Consumer prices for June were up 5 percent from the year before, the fastest one-year change since 1991. Jeffrey Rubin, chief economist of Toronto-based investment bank CIBC, predicts a 6 per cent rate for overall inflation, a level last seen in 1982.
His reasoning: Increased shipping costs are making goods produced in the United States more competitive with goods shipped from China.
“High energy prices give American manufacturing workers bargaining power that they have lacked for over a decade, while at the same time encouraging them to ask for larger pay raises to keep pace with the soaring price of gasoline,” Rubin wrote.
If workers can bargain for cost of living increases, sparking inflation further, then interest rates will rise too, Rubin predicted.
“The last time we saw 6 per cent inflation in 1990, the federal funds rate was running at around 7.5 per cent - over three times today's setting. And a 10-year Treasury bond was yielding 8.5 per cent - over double what it yields today.”
