The US economy is prone to grapple with a recession in 2023 as well as another inflation spike, Michael Burry has said.
The investor of “The Big Short” fame, known for his often accurate predictions, issued the ominous forecast in a tweet posted Sunday.
“Inflation peaked. But it is not the last peak of this cycle,” he said. “We are likely to see CPI lower, possibly negative in 2H 2023, and the US in recession by any definition.”
He added: “Fed will cut and government will stimulate. And we will have another inflation spike. It’s not hard.”
Inflation skyrocketed to a 40-year high of 9.1% in June and stood at 7% in November, well above the US Federal Reserve’s 2% target. The central bank reacted by raising its base interest rate from near-zero to more than 4% and has signaled it will peak above 5% in 2023.
Higher interest rates aim to cool down pressure on prices by discouraging spending, investing and hiring. Nonetheless, they can erode corporate profits and sap economic growth, leading to slumps in asset prices and, ultimately, recession.
