Economic environment doesn't lend itself to Fed's 2% inflation target: Fifth Third's Korzenik

Summary

Jeff Korzenik, chief economist at Fifth Third Commercial Bank, discusses the macroeconomic impact of tariffs, the Fed's 2% inflation target, and energy prices. He argues that structural changes, especially the loss of globalization, mean the US economy now has persistent inflationary pressures that make the 2% target unattainable. He also suggests the Fed should wait for task force reports before changing policy and questions whether the 2% target is still appropriate.

• Tariffs have not yet caused a major negative macroeconomic impact, but they are part of a broader structural shift.
• The end of globalization that previously dampened prices is preventing the Fed from hitting its 2% inflation target.
• The Fed has failed to meet the 2% target for over five years, indicating a structural rather than transitory problem.
• The Fed's core inflation measure excludes volatile energy prices, so it will likely overlook short-term energy moves.
• Korzenik would wait for year-end task force reports before making any monetary policy changes.
• He believes the Fed may have the wrong target, as the 2% target was set in 2012 for a deflationary environment that no longer exists.
• No specific investable assets or trades are recommended in the discussion.