Inflation Pressures Remain in 'Cyclical Upswing,' Says Lakshman Achuthan

Inflation Pressures Remain in 'Cyclical Upswing,' Says Lakshman Achuthan

Bloomberg

Thu, September 17, 2026 at 5:02 PM GMT+3

US Treasuries advanced Thursday as the Federal Reserve's interest rate hike reassured investors that the central bank is determined to tame inflation. Lakshman Achuthan, COO and co-founder at ECRI, reacts to the Fed decision and what comes after the first hike of a rate hike cycle.

00:00 Speaker A

Yeah, it's not bad. I think we're flirting here with uh, dare I say it an inflationary boom. That's what you've been feeling, right? You got great growth. Uh and you got inflation that was uh it's more than energy, right? So this all all our inflation cycle stuff kicked up before uh the hostilities in in Iran. So we've got growth

00:24 Speaker A

and inflation, your nominal numbers blow out.

00:29 Speaker B

Right.

00:30 Speaker A

Okay, feels feels pretty good, right? Uh but you got 8% last quarter, you got 8% nominal, you got one and a half% real. All that stuff in there is inflation. Um, so let's see what happens.

00:46 Speaker B

Okay, yesterday I brought this up live and you know, Braman and I were going back and forth on she didn't disagree, she didn't agree with me. Kevin Gordon had the beautiful chart here.

00:59 Speaker B

That entire meeting is predicated out to 2029. Somehow the American economy doesn't slow down. Hm. You guys have been doing this since the 1930s. That's at some point, nominal GDP comes in.

01:16 Speaker A

Yeah, yeah, yeah. and then and then the squeeze happens, right? So either uh your growth falls off and your inflation is still high, so margins get squeezed or um inflation comes down, which means your profits aren't what they used to be. So, so this squeeze happens at some point, look, trees don't grow to the sky, right?

01:42 Speaker A

I can't see to 2029. I can look out a few quarters and I could say it's holding up. There's no, there's no, um, huge downturn, there's no big bump in the road here and we have inflation still moving to the upside.

02:00 Speaker A

Energy prices notwithstanding, the long end coming down a little bit because he hiked notwithstanding. Um, underlying cyclical direction of inflation, the trend, Mr. Warsh emphasize the trend. My my only gripe with him is he's looking at the coincident data. I'm looking at the forward data. The trend in the forward data remains up. So,

02:24 Speaker A

one and done, no. Now maybe everybody's adjusted to two and done. No. I think the history shows us uh they tend to do more than that.

02:35 Speaker C

So, again, that's kind of where I wanted to go here. I mean, historically, it's not one and and done. historically the Fed does Yeah. Yeah. two, three, maybe even more.

02:48 Speaker C

Yeah. Could it be more? Do you think?

02:50 Speaker A

Oh yeah. Yeah, everything I'm saying is yeah, totally. You should adjust to more. And and when you when you when you look at um where's the gas, right? I think people have come around to the economy's doing okay.

03:07 Speaker A

uh, despite the K, uh, which is real. I just don't want I don't want to ignore the K. Um, but I think it's the inflation expectations component. That's been pretty chill, relatively speaking. and that's where I think there's some opportunity for movement.

03:26 Speaker C

So, I, you know, the economy running I I guess you call it hot, right? at Yeah. north of six Yeah, it's hot. north of 6% but I mean how long does that, how much of that is is AI? because that's one of the the questions I have because I'm I'm not sure of the answer. It feels like it's meaningfully contributing to economic growth and I'm not sure how long that AI investment stage continues. How do you guys think about that?

03:54 Speaker A

Look, uh we it's all around us. Uh we've got the we've got but we have the solo paradox in like the AI version of it, which is it's everywhere except in the productivity statistics, which have come down, right? They everybody got excited because productivity edged up towards 3%. Now it's closer to two. Um so it's not there which gives you some inflation issue. You don't have a structural inflation break. I know Warsh wants that, but he recognizes he doesn't have that. And so when he's looking at the coincident data, he sees the trend is in the wrong direction. I'm telling you, we look at the forward trends, it's going to continue to go that way.

04:30 Speaker B

One one final question. Within Yeah. the massive heritage of the economic cycle researchers to full disclosure folks, my grandfather subscribed to ECRI. I remember seeing it, you know, there there the the smoke filled haze of his study. What happens after Trump?

05:00 Speaker A

The cycle stays. The cycle, look, well, they're personalities. Um, and and and and for as big of a personality Trump is, he's not the first president to say lower interest rates and do this and do that and spend more money or whatever. I mean, that's what they all do. They all and they're variations on it. But at the end of the day, um in a free market oriented economy, uh you're going to have business cycles. As far as I could see, I've looked for centuries in the US and I've looked around the world for almost a century and the cycles persist. And right now, you have a there's two big cycles, growth and inflation, they're both to the upside. So I'm leaning a little bit more towards inflationary boom, however you want to express that in your life.