We recently chatted with Tom O'Gorman, Senior Vice President, Director of Franklin Bissett Fixed Income, at Franklin Bissett Investment Management.
In this segment of our discussion about the economy and market, Tom O'Gorman points out that while there is definitely inflation within financial market prices, its not clear whether there is real pricing and goods inflation. The Fed has two mandates - price stability and full employment, however, he says "Inflation was higher 3 or 4 years ago when the Fed was doing QE, than it is today."
Was the GDP consumption pop that occurred in the latest year, driven by wage growth or credit - he says there is no sign of wage growth, so his/their thesis is that consumption has been driven by taking down the savings rate and/or borrowing; there was a massive amount of growth in consumer credit over the 2017 period, while the savings rate is being drawn down to near-record low levels. Tom O'Gorman asks "Is this sustainable?"
Are central banks caught between a pillar and post of conflicting views on inflation? What lies ahead? Our conversation continues.
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