Bloomberg Surveillance · Thursday, September 24, 2026
An analyst argues that if inflation is driven by excess demand, Fed rate hikes will help reduce it over the next 12-18 months. However, if inflation is primarily a supply-side phenomenon, the Fed's actions may merely coincide with inflation naturally decreasing, while still helping to anchor inflation expectations.
“If the theory of inflation is we have some excess demand in the system, that demand ultimately has to be, to some extent, interest rate sensitive.”
“Squeeze it out over the next, again, 12 to 18 months? The answer is yes. This will take a step in the right direction.”
“If the answer is, look, inflation is a supply-side phenomenon. There are tariffs. There are energy shocks playing through. There's a number of energy shocks, a number of shocks playing through that are interest rate agnostic. They may phase out on their own The Fed hikes may just coincide with inflation coming down. We'll take that as well. It just keeps inflation expectations in the right place.”