Nouriel Roubini predicts Fed will ‘wimp out’ on raising rates


Economist Nouriel Roubini predicted the downfall of the US housing market in 2008. Now he’s predicting the Federal Reserve will “wimp out” when it comes to raising rates.

He said the Fed won’t have the guts to put the brakes on the economy even as inflation threatens to spiral out of control.

The economist, who became known as “Dr. Doom” because of his prescient call on the 2008 crisis, has been persistently warning about “irrational exuberance” in markets — citing all the money sloshing around that’s being plowed into cryptocurrencies and meme stocks, for instance. (Roubini in recent years has called bitcoin “bulls–t.”)

Roubini said the combination of sluggish growth and inflation — also known as stagflation — will continue for several quarters.

Meanwhile, US core personal consumption expenditures — the Fed’s preferred measure of inflation — will exceed 3 percent over the next year, he said. The Fed aims for a 2 percent PCE. The latest read of the figure was at a 30-year high — clocking in at 3.6 percent in August compared to the same period last year.

Roubini said a bottled-up supply chain — and labor shortages — were helping to push inflation higher. Both issues also would hit economic growth, he said.

Nouriel Roubini has warned the Federal Reserve will lose its nerve when it comes to raising rates.

Amid these market conditions, Roubini believes it will be difficult for the Federal Reserve to hike rates or slow its purchase of assets — a reversal of quantitative easing.

“They are going to postpone any finishing of tapering or raising rates,” Roubini said in an interview with Bloomberg on Tuesday. If growth slows, the Fed will “end up being dovish,” or hesitant to tighten monetary policy.

The Fed said late last month that it may start raising its benchmark interest rate sometime next year — earlier than it envisioned three months ago. It’s a sign that the central bank is concerned that high inflation pressures may persist.

Gas prices
Nouriel Roubini warned of higher oil prices, which could mean gas prices rise even further.
Justin Sullivan/Getty Images

And the NYU economist wasn’t done with his concerning predictions: He said as inflation climbs higher, the price of oil will surge to $100 per barrel — a hefty hike from the current price of $83 per barrel.

“I see an upward trend in oil, coal, natural gas and other energy prices,” he said.


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Kathy Lewis

Kathy Lewis is an all-around geek who loves learning new stuff every day. With a background in computer science and a passion for writing, she loves writing for almost all the sections of Editorials99.

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