Inflation debate divides Wall Street with some seeing danger, while others say the game has changed

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Whether the Federal Reserve’s policies and massive U.S. debt are the kindling for an inflationary fire has yet to be seen, but the very idea the U.S. could face a spiral of rising prices is a topic dividing Wall Street.

Some big investors believe spiking inflation could become a problem, like billionaire hedge fund manager Stanley Druckenmiller, who says the Fed’s actions and Congressional spending could take inflation to 5% to 10% in the next four to five years. 

But others believe the world has changed, and there is not the same pressures that might have existed in the past with technology and big data speeding change and lowering costs. The impact of the pandemic also speeded some change, such as telemedicine and more virtual meetings and internet-based learning.

America hasn’t seen high inflation in more than a generation. The worry is that rising prices squeeze business profits, hurt consumers, and undercut retirees’ savings.

“I just don’t buy the argument that we’re going to have runaway inflation any time soon because of all the factors that will bring your costs down,” said Rick Rieder, chief investment officer of global fixed income for BlackRock. “You can argue parts of health care and parts of education, those costs are coming down as well. I think you’re seeing more technologies and efficiencies.”

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