The Federal Reserve is “pouring fire” on the “glowing embers of inflation” as it expands its balance sheet while tapering its bond-buying stimulus, Jim Grant, founder and editor of Grant’s Interest Rate Observer, told CNBC Tuesday.
In an interview with “Closing Bell,” Grant said the Fed’s monetary policy has led to an inflation of asset values, will likely lead to a measured rate of consumer price inflation and will certainly lead to “financial turmoil.” If that turmoil is severe enough, he thinks it could introduce another risk of deflation.
“Deflation is a monetary event such that prices collapse, not because productivity is higher but because everyone has to sell and that is part and parcel of a financial accident,” he said. “The Fed is going to give us a financial accident.”
The Federal Reserve began its two-day meeting Tuesday. It is expected to continue cutting back its stimulus by $10 billion per month.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.