Earlier on Wednesday, the Federal Reserve announced that it would be appropriate to raise US interest rates soon due to inflation overshooting the central bank’s target of 2% per annum. The inflation crisis has made US President Joe Biden noticeably frustrated as evidenced on Monday when he referred to a Fox News reporter as a "son of a bitch" for raising the subject.
"It is a little bit late at this stage to shift gears as they should have done… a half a year ago," Shostak said.
The US unprecedented inflation, now at a 40-year high, he said, is an "ugly child" of the Fed's own money-printing policy.
"Now the Fed is on a crusade to contain the rise of the 'monster' it had created but it is too late," he said. "The genie is out of the bottle."
He also said now the United States is facing the risk of growth shock with far reaching consequences not only for the US economy but also for the entire world.
Shostak noted that over the past two years, Presidents Donald Trump and Joe Biden have injected massive amounts of money into the US economy to fight the pandemic. Yet, he added, because not all the stimulus has been spent, the US has seen upward pressure on consumer prices and the economy was put back on the path of growth.
The investor said no one should expect wages to continue to grow 4% a year, real estate 13%, and equity markets 20% perpetually. The consumer basket, he added, by many estimates has "gone through the roof" by more than 20% on average.
Speaking of the global economy, Shostak compared it with healthcare, adding that as the Fed is "coughing," the world "will be getting a cold." Growth prospects in emerging economies are hence becoming much more uncertain, he said.
"Many countries are struggling to come out of Covid, with their public budgets on the brink of exhaustion. The inflation is making consumers poorer while sovereign and corporate debt is piling up," the expert said, adding that some local currencies are already sliding against the dollar.