US inflation has reached a 40-year high with annual consumer prices rising to 9.1 per cent, according to the US Bureau of Labor Statistics.
The figure is up from the 8.6 per cent reported in May and higher than market expectations of 8.8 per cent.
Following the news, deVere Group CEO Nigel Green said the higher-than-anticipated figure will send markets into a “temporary tailspin” and urged investors to capitalise on panic-selling due to the view that the figure will “fuel investors’ fears about an aggressive tightening response from the Federal Reserve”.
Mr Green argued that many will be “jittery” about a potential rate move of 100 basis points.
“Despite the noise, I would urge investors to maintain perspective,” he said.
“They should remember that this is backward-looking and puts in the spotlight high gas prices from June that are now coming down, along with many other prices that have also seen a drop since then.
“As markets continue to be unsteady in the near term, investors will be using the downturn to their financial advantage by topping-up their portfolios with quality stocks at lower prices.”
“The panic-selling will create some important long-term opportunities with high upside potential and low-risk possibilities for those who buy judiciously.”
Meanwhile, Principal Global Investors chief global strategist Seema Shah said as inflation continues to rise it is “unthinkable” that the Fed will slow its tightening pace.
“A 0.75 per cent hike in July is surely a done deal and further increases of that magnitude cannot be ruled out,” Ms Shah said.
“We see rates moving to 4.25 per cent next year as the Fed desperately attempts to recover from its earlier erroneous inflation read.”
The news comes after Federal Reserve chairman Jerome Powell hinted at raising interest rates for June and July after the benchmark interest rate increased by 0.5 per cent; the single highest increase since May 2000.
“If things come in better than we expect, then we’re prepared to do less. If they come in worse than when we expect, then we’re prepared to do more,” he said last month.
Mr Powell said the Fed’s long-term aim is to get inflation back to 2 per cent while keeping the labour market strong. However, they conceded that getting to that figure will “include some pain”.
Neil Griffiths
Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.
Neil is also the host of the ifa show podcast.
