US inflation is ‘much more cussed’ and will final a decade

US inflation is likely to be “far more persistent” and last a decade, according to Bill Smead, chief investment officer at Smead Capital Management.

Wall Street is bracing for key inflation data later Tuesday when the Labor Department releases its January CPI. It’s a widely used measure of inflation, measuring the cost of dozens of goods and services throughout the economy.

“The excitement … right now is the hope that we’ll get a friendly Fed out of a soft landing, and we don’t think that will be the case,” Smead told CNBC’s Streets Sign Asia.

“We think inflation will be much tougher and last longer — a decade, actually, because we have incredibly favorable demographics in the United States.”

In early February, the Federal Reserve raised its benchmark interest rate by a quarter of a point, and barely indicated it was nearing the end of that cycle of rate hikes.

controlling inflation

Smead stressed that despite the recent rate hikes, the Fed will struggle to tame inflation.

“We have 92 million people between the ages of 22 and 42, and they’re all going to spend their money on necessities over the next 10 years, whether the stock markets are good or bad,” Smead said.

“They’re just going to live their lives. The economy should be doing pretty well and the Fed will have a hard time controlling inflation,” he added.

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For now, investors appear to be betting on a solid CPI reading on Tuesday, showing that inflation is cooling and that a pause or turning point in Fed rate hikes could be imminent.

On the downside, analysts warned, a failure would likely indicate the Fed will hike rates even further.

Economists expect the consumer price index to rise 0.4% in January, which would translate to annual growth of 6.2%, according to the Dow Jones. Excluding food and energy, the so-called core CPI is expected to rise 0.3% and 5.5%, respectively.

Stock futures ticked lower Tuesday morning as investors eyed the inflation data.

Futures linked to the Dow Jones Industrial Average fell 25 points, or 0.07%. Meanwhile, S&P 500 futures fell marginally and Nasdaq 100 futures fell 0.12%.

— CNBC’s Jeff Cox contributed to this report

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