A top investor at the world’s biggest hedge fund has warned that high inflation is here to stay and central banks may be powerless to fight it without derailing the economic recovery, following a week in which soaring energy prices rocked markets around the world.
Bob Prince, co-chief investment officer at Bridgewater Associates, said the Federal Reserve’s assertion that the current burst of inflation will prove transitory is likely to be challenged. Price pressures will be hard to fix, he said, given they are coming out of a shortage of resources that are in high demand as the global economy rebounds from pandemic lockdowns.
“If there is inflation, the Fed is in a box because the tightening won’t really do much to reduce inflation unless they do a lot of it, because it is supply driven. And if they do a lot of it, it drives financial markets down, which they probably don’t want to do,” he told the Financial Times.