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Gary Cohn: Inflation is ‘totally unacceptable’ and ‘really hurts’ Americans

Gary Cohn, former chief economic adviser to President Trump, says stubbornly high inflation is putting the Fed and consumers in a difficult position as prices hover near 40-year highs.

“We’re at 8.2% inflation in the United States here — a totally unacceptable number,” Cohn said in an interview during Yahoo Finance's All Markets Summit on Monday (video above). “It’s a number that really hurts American consumers, and it's really regressive inflation.”

His comments follow September’s hotter-than-expected inflation print, which showed that the Consumer Price Index climbed 0.4% since August despite the Federal Reserve’s aggressive rate hikes.

Since mid-March, the Fed has raised its benchmark federal funds rates by 300 basis points at the most aggressive pace since the 1980s. And more rate hikes are likely on the way as inflation runs well above the Fed’s 2% target with little evidence of cooling prices.

"Unfortunately, [higher rates] hit consumers almost immediately,” Cohn explained. “So if you’ve got an adjustable-rate mortgage, it adjusts the next day. If you’ve got credit card debt, it adjusts the next day. But the real policy effects on slowing down demand, that takes a year to a year-and-a-half to feed through the economy."

In minutes released from the Federal Reserve’s September FOMC meeting, officials acknowledged that inflation is “showing little sign so far of abating" while emphasizing that "the cost of taking too little action to bring down inflation likely outweighed the cost of taking too much action."

Federal Reserve Bank of St. Louis President James Bullard recently pointed to the possibility of two more 75 basis point increases before the end of the year, telling Reuters that it “makes sense that we’re still moving quickly.” If the Fed does in fact raise rates by 75 basis points at its next two meetings, that will bring the fed funds rate to a range of 4.50% to 4.75%.

“The Fed is in a very difficult position,” Cohn warned. “They were late to the game, which means they’re now playing catch up… The Fed's going to continue to keep raising rates to try and break this cycle. They won't know they have broken it until long after it's broken.”

Seana Smith is an anchor with Yahoo Finance. Follow her on Twitter at @SeanaNSmith.

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