on CNBC Delivering the Alpha Investor Summit In New York City on Wednesday, several big names in the investment community said they see no signs that inflation is slowing.
David Rubenstein, co-founder and co-chairman of Carlyle GroupHe said that while “we’ve been used to 2% inflation for the last 25 years, we have to get used to the fact that inflation isn’t going to be 2% any time soon,” adding that “it takes a long time as Paul Volcker said to get it out of the system.”
“This inflation is here to stay,” he said. JPMorgan Mary Callahan Erdoes, Executive Director of Wealth and Asset Management.
Many CFOs of major companies share the view that inflation has yet to peak, according to the results of the latest CNBC CFOs Council quarterly survey.
A woman shops for oat milk at a supermarket in Santa Monica, California, on September 13, 2022.
Apu Gomes | AFP | fake images
Most CFOs (57%) said they don’t think inflation has peaked. More than a quarter of CFOs say that inflation is the biggest external risk factor facing their business. That’s down from the 40% who cited inflation last quarter, as concerns about consumer demand in the weakening economy rise among CFOs, with more now citing it as their No. 1 risk.
CNBC’s Council of CFOs survey is a sampling of the current outlook among top financial officials. It was carried out between 21 financial directors of important organizations between September 12 and 27. Council membership includes 44% of Fortune 500 CFOs, and of that cohort, half of Fortune 100 companies.
Business executives across the economy have rallied around this view of inflation in recent weeks. Costco CEO Craig Jelinek told CNBC’s Jim Cramer on September 13, “I think you’ll see maybe another six months or a year, things will start to get worse.”
At a press conference on September 21 after the Federal Reserve raised benchmark interest rates by another three-quarters of a percentage point, Fed Chairman Jerome Powell said that while the Fed’s “expectation was that we would start to see inflation going down…inflation hasn’t really gone down.”
With inflation lingering, CFOs have changed their minds about the timing of a recession as a result of the Fed’s rate hikes.
Nearly half (48%) of CFOs surveyed said they expect a recession in the first half of 2023, down from the previous quarter’s survey when 68% cited the first two quarters of next year as the most likely start of a recession. recession, as more CFOs bring recession expectations closer in time. Nineteen percent of CFOs now say they expect a recession in the fourth quarter of this year, up from 13% in the second quarter. Additionally, another 19% of CFOs said the US economy is now in a recession.
Treasury Deputy Secretary Wally Adeyemo told CNBC’s Ylan Mui on Delivering Alpha that the Biden administration is doing all you can fight inflation to avoid a recession.
“Consumer confidence remains high. Consumer and business balance sheets are healthy. We have a huge boost in the job market where we’ve added more than 300,000 jobs in the last three months on average,” he said.
The CNBC survey finds that companies are still in hiring mode, with 57% of CFOs saying they expect to increase headcount in the next year. Less than 10% expect to reduce staffing levels.
Overall, CFOs surveyed in the CNBC Council of CFOs survey support the Fed’s policy moves to control inflation, with more than half (52%) saying its efforts have been fair, while 19 % said they have been good. About 29% said those efforts have been lacking.
“We have always understood that restoring price stability while achieving a relatively modest decrease, or rather an increase, in unemployment and a soft landing would be a huge challenge and we don’t know, nobody knows if this process will lead to a recession or if then , how significant that recession would be,” Powell said at his final post-Fed meeting news conference. “That’s going to depend on how quickly wage and price inflation pressures subside, whether expectations remain we also get more job offers, which would also help.