Steve Forbes, chairman and CEO of Forbes Media, weighed in on the latest inflation data on Tuesday shortly after its release, blasting the Federal Reserve for its approach to curb price hikes.
Forbes, who wrote a book about inflation, explained the "real cure" to curb the price hikes, arguing that the key is keeping the U.S. dollar stable.
"I think what you’re seeing unfolding now is really conflation of two kinds of inflation, one is the chain disruptions we’ve had and that’s raising prices. We are going to see it in food with what’s happening in Ukraine," he told "Mornings with Maria" on Tuesday.
"But the big thing long-term that is very, very destructive is the Federal Reserve undermining the value of the dollar."
He then pointed to the rallying price of gold.
|GOL||GOL LINHAS AÉREAS INTELIGENTES||3.00||-0.18||-5.82%|
This year, gold prices have popped amid the conflict overseas. Analysts have argued that gold's role as an inflation hedge appears to be buoying the metal.
"There’s massive amounts of money out there – massive amounts of reserves," Forbes told host Maria Bartiromo. "The Fed has been playing with a gimmick… trying to keep $1.7 trillion out of the banking system through what they call reverse repurchase agreements."
He then stressed that the Federal Reserve thinks "the way you fight inflation is by slowing the economy down and instead of a soft landing, you often get a crash landing."
"They think prosperity caused inflation so they think they got to create more unemployment and slow the economy, which is a disaster [and] unnecessary," Forbes continued, referring to the central bank’s goals of achieving maximum employment and a long-term inflation average of 2%, which is significantly lower than the 8.5% annual inflation rate reported in March.
Forbes provided the insight shortly after it was revealed that inflation accelerated to a new four-decade high in March as supply chain constraints, the Russian war in Ukraine and strong consumer demand fueled rapid price gains that wiped out the benefits of rising wages for most Americans.
The Labor Department said Tuesday that the consumer price index – which measures a bevy of goods including gasoline, health care, groceries and rents – rose 8.5% in March from a year ago, the fastest pace since December 1981, when inflation hit 8.9%. Prices jumped 1.2% in the one-month period from February, the largest month-to-month jump since 2005.
The March inflation data is the first to capture the full effect of the European war, which sent gas prices in the U.S. to the highest since 2008.
The new data will also have major implications for the Federal Reserve, which has taken a more hawkish approach to fight inflation in recent months: Policymakers raised rates by a 0.25 percentage point in March, and have since signaled support for a faster, half-point increase at their May meeting.
The biggest question now is whether central bank officials can successfully tame inflation and stabilize prices without triggering an economic recession. Raising the federal funds rate tends to create higher rates on consumers and business loans, which slows the economy by forcing them to cut back on spending.
Even as inflation at the consumer level surged to the highest level since 1981, U.S. stocks rose on Tuesday.
|I:DJI||DOW JONES AVERAGES||30802.39||-165.43||-0.53%|
|I:COMP||NASDAQ COMPOSITE INDEX||11281.60339||-40.63||-0.36%|
Reacting to the market rally, Forbes said, "I’m clutching my cash."
"When you look at Europe going in recession, China [is] weak, you see real problems here in the U.S., I’d be very cautious," he added.
Chairman Jerome Powell has pushed back against concerns that further tightening by the central bank will trigger a recession and has maintained optimism that the Fed can strike a delicate balance between taming inflation without crushing the economy.
FOX Business’ Megan Henney contributed to this report.