Inflation is 'normalizing' back to 2% range: Strategist

US Treasury Secretary Janet Yellen spoke with Yahoo Finance Reporter Jennifer Schonberger in an exclusive interview outlining new efforts from the Biden administration as well as deficit spending, taxes, and more.

RSM chief economist Joe Brusuelas and Truist co-chief investment officer and chief market strategist Keith Lerner join Asking For A Trend to give insight into Secretary Yellen's commentary and the economy's improvement as the election nears.

Brusuelas comments on the power of Yellen's rhetoric: "I think that Secretary Yellen is always a very effective spokesperson. Any time she talks, I stop and listen to what she has to say. And I'm in agreement: our forecast in terms of the overall rate of inflation getting back to 2% is the fourth quarter of next year. But we've got disinflation moving through the economy and I think we'll get some more. We'll get some really nice data here at the end of the week, the day after the debate. "

In response to Yellen's comments on inflation, Lerner states, "We think all in all, we're kind of normalizing in the economy back towards a 2% economy and inflation that maybe settles around 2.5%, maybe around three, somewhere in that neighborhood. So we're we're not that far off is the main thing. But the point you just made too is the elections matter, but our work strongly suggests other factors in aggregate actually matter more."

Watch Yahoo Finance's full, exclusive interview with US Secretary of the Treasury Janet Yellen.

For more expert insight and the latest market action, click here to watch this full episode of Asking for a Trend.

This post was written by Nicholas Jacobino

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More reaction to our exclusive interview with Treasury Secretary Janet Yellen.

We're bringing in Joe Brusuelas, chief economist at RSM and Keith Lerner, co, chief Investment Officer and Chief Market strategist at trues guys.

Uh Good to have both of you on the show.

Joe.

I'll start with you.

Listen, I'll give you the floor.

Joe, you heard that interview uh with Janet Yellen.

What, what did you make of it, Joe, what were some of the big, the big themes, the big trends you heard?

Well, I guess the, the big takeaway I heard is, is the, the message on housing which uh the administration clearly is pushing ahead of this week's debate.

You know, they've got a very ambitious plan whereby they're gonna put $100 million on the table in addition to, to sponsoring 2 million homes, uh construction of 2 million homes.

They've through the Fannie and Freddie Mae, uh institutions are able to offer 10,000 the first time buyers, 25,000 to first generation buyers and they're moving forward rental assistance where they can out there for uh households that are under stress.

You know, I think that uh Secretary Yellen is always a very effective spokesperson.

Anytime she talks, I stop and listen to what she has to say.

And I'm in agreement our forecast in terms of the overall rate of inflation getting back to 2% is the fourth quarter of next year.

But we've got disinflation moving through the economy and I think we'll get some more, we'll get some really nice data here at the end of the week, the day after the debate.

Yeah, indeed.

She um shared that optimism and um Keith, as you write in a recent note, you say the path of inflation and interest rates and whether the Federal Reserve can stick to soft economic landing will likely be more consequential than the election.

I wanna replay what we just heard from Secretary Yellen about uh her outlook for inflation.

I do expect inflation to come down and as we get into next year, I believe that inflation will uh go back to uh the fed's 2% target.

So, what do you think Keith, do you share that optimism here?

And then what are the implications for markets?

Yeah.

Well, great to be with you.

It's an election year.

So it's always an interesting times as a strategist.

Uh Well, listen, we do think we have this inflationary forces intact.

I think we think inflation will settle probably a little bit above 2% because of things like on shoring.

Um we think um energy prices will probably stay a little bit higher as well.

But the trajectory we are seeing those disinflation trends, the one thing we're watching is to make sure it's more because of the disinflationary trends, not because the economy is weakening, causing more, you know, more of those trends to soften as a whole.

But we think all in all, we're kind of normalizing in the economy back towards the 2% economy and inflation that maybe settles around 2.5% maybe around three somewhere in that neighborhood.

So we, we're not that far off is the main thing.

But the point you just made too is, you know, the elections matter, but our work strongly suggests other factors in arrogate actually matter more.

I have a question for each of you guys.

So short answers, please.

Uh But you know, Biden's got a closing window here in terms of improvements in the economy that voters will feel before they make up their mind to vote.

So let's call it by mid October.

Uh Joe, I'll go to you first.

Uh Do you feel like the economy is gonna get appreciably better in ways that people will feel by mid October?

I do.

I think that the economy is a funny way of trumping ideology and politics.

Rick.

I think that that 40 year or 50 year low in unemployment, 4% for greater than 30 months, 15.6 million jobs that will resonate at the end of the day because when voters really look at what their economic conditions they're thinking about is my income rising faster than inflation.

Yes.

Do I have job security?

Yes.

And are things getting better?

They are Keith?

You want to take a step?

Yeah, I say historically, if you didn't, if you don't have a recession in the, in the few years before an election, you normally get reelect.

I just wonder if it is different this time where there's just different policy views of, of the American people that may change things because I don't think the economy is gonna get stronger for me.

I think it's likely to just stay somewhat resilient but normalizing and the unemployment rate likely ticks up a little bit so still resilient.

So, I, I just wonder this time if that's gonna be the, the, the same game changer that it has been his history.

But historically that has been the way, uh, it's played out.