Blitz Sees Disinflation Stalling, Fed Still Striving for 2% Target

Steve Blitz is Chief U.S, Global Economist at GlobalData TS Lombard. He has worked in the Wall Street arena for more than 40 years combining his extensive work in financial markets and economics research to analyze, understand and even predict for clients where the Federal Reserve and other central banks are heading.

With his long career in the investment world it’s significant that he is in the camp that sees progress on U.S disinflation stalling out as government spending on goods and services jobs creates jobs that continue to fuel demand. “And government spending always leads to a higher level of inflation…if we look at this cycle where the strongest growth in employment has been, it’s been federal workers not counting the post office…that’s the basic reason I think that’s the basic reason the core inflation rates are higher.”

As for disinflation stalling out Steve sees a red inflation flag in rising goods prices ex-energy, which he says has been negative from mid-2023 to mid-2024 now up plus 2% over the last three months “and that reflects demand.”

So why is the Fed keeping a December rate cut on the table now and tilting toward continued rate cuts in 2025?

Rather than simply analyzing the inflation data, various Fed forecasts, and what’s driving them, Steve brings in a more “existential” dynamic.” This is the fact that for more than 30 years inflation has always continued to return to 2%. Which means that a few generations of central bankers, investors, portfolio managers, and academics have in a sense been conditioned to expect this to happen again.

”I really cut my teeth on inflation, understanding it back in the late seventies, early eighties,” years when legendary Wall Street economist Henry Kaufman was one of his first bosses.

”Now I think we can assume in the current environment if this was Greenspan, and let’s go back to 1991, he would never have cut…He would never have let inflation get high.”

So sit back and see, hear the narrative Steve weaves together. It does not lend itself to soundbites and bullet points. It does weaves together a sees fascinating economic narrative that sheds light the forces driving the Fed and markets now.

Steven Blitz
GlobalData TS Lombard
Managing Director, Global Macro Chief US Economist

Steven joined the company in 2017. His professional experience as economist and portfolio manager began in the late 1970s.

It includes econometric modelling at Data Resources Inc., creating interest rate and FX derivatives strategies at Salomon Brothers, managing US and global fixed-income portfolios at OFFITBANK, being global head of fixed-income at Lazard Asset Management and, more recently, as Chief Economist at M Science he developed “big data” to underpin his analysis of the economy, central bank policies, and capital market pricing.

Aside from his extensive client-facing work, Steven is a well-known commentator on economic and financial issues, is frequently quoted in the financial press, appearing on TV and radio, and writing guest columns for financial publications.