Here’s why Moody’s Analytics’ Mark Zandi worry about oil prices

Mark Zandi, Moody’s Analytics chief economist, joins ‘Squawk on the Street’ to discuss his expectations from the Fed’s next move, whether the soft landing is too much of a good thing, and more.

ANNUAL RATE IN THREE YEARS IN DECEMBER TRADERS PAIRING BETS ON A MARCH FED CUT. MOODY’S ECONOMIST MARK ZANDI JOINS US NOW IT IS HARD TO BELIEVE THAT WE ARE HERE WITH 2.9% ON CORE PCE WE JUST GOT THIS GDP REPORT AT 3.3% ANNUALIZED, EVEN HIGHER NOMINAL GDP.

I GIVE YOU CREDIT, YOU SAID SOFT LANDING WHEN EVERYONE ELSE CALLING RECESSION. WHAT DOES THE FED DO NEXT? >> WELL, A CUT IS JUST A QUESTION OF WHEN I DON’T — MARCH, MAY, THAT’S SIX WEEKS, I’M NOT SURE MAKES A DIFFERENCE I WOULDN’T ARGUE WITH ANYONE WHO

SAID MARCH, BUT MY SENSE IS THEY’LL PROBABLY PUSH COMES TO SHOVE WAIT LONGER TO MAKE ABSOLUTELY SURE INFLATION IS AT TARGET OR HEADED TO TARGET BEFORE THEY MAKE THAT MOVE YOU KNOW, WE’RE HERE YOU’RE RIGHT, VERY SURPRISING. I MEAN EVEN FOR ME, I DIDN’T EXPECT WE WOULD BE AT 2%

IF YOU LOOK AT CORE CONSUMER EXPENDITURE INFLATION OVER THE PAST SIX MONTHS IT’S LESS THAN 2% ON AN ANNUALIZED BASIS. WE’RE HERE. >> HOW DID THEY — I MEAN, WILL IT LAST? I MEAN, IT’S HARD TO BELIEVE THAT THEY MANAGED TO GET THE SOFT LANDING THAT THEY WANTED,

BUT I DON’T KNOW, TOO MUCH OF A GOOD THING >> YEAH. I THINK WE’RE — YEAH. I MEAN IT’S — THERE’S ALWAYS GOING TO BE A STRUGGLE, BUT I THINK, YOU KNOW, THERE’S GOOD REASON TO BELIEVE THAT INFLATION HAS COME BACK IN, INFLATION EXPECTATIONS ARE WELL TETHERED

AND ANCHORED WAGE GROWTH IS MODERATING, CONSISTENT WITH PRODUCTIVITY GROWTH YOU KNOW, ALL THE THINGS THAT ONE WOULD LOOK AT TO GAUGE WHETHER INFLATION IS GOING TO REMAIN STABLE AND LOW ARE IN PLACE, SO I THINK WE CAN STATE WITH SOME CONFIDENCE THINGS HAPPEN. ONE THING I WORRY ABOUT IS OIL PRICES

VERY HARD TO FORECAST WHERE THEY’RE GOING. A LOT OF CROSS CURRENTS IN GLOBAL MARKETS AND GIVEN ALL THE GEOPOLITICAL THREAT. IF OIL PRICES GO BACK UP THAT COULD SCRAMBLE THINGS FOR A WHILE. BARRING SOMETHING UNFORESEEN, IT JUST FEELS LIKE, YOU KNOW, INFLATION IS BACK IN THE BOTTLE.

>> IS IT BACK IN THE BOTTLE FOR ORDINARY AMERICANS YOU KNOW, I TALK ABOUT ALL THIS PROGRESS ALL THE TIME AND HOW SECRETARY YELLEN IS VERY THRILLED WITH THESE RESULTS AND PRESIDENT BIDEN SHOULD BE VERY HAPPY AND THEN EVERYONE SAYS YOU DON’T KNOW WHAT IT FEELS LIKE.

WE’RE STILL PAYING MUCH HIGHER PRICES THAN WHERE WE WERE SEVERAL YEARS AGO, WE’RE STILL NOT AT THE POINT WE’RE ALL THE WAY BACK DOWN. PEOPLE ARE FEELING THE EFFECTS OF HIGH INFLATION AND THEY’RE POINTING THEIR FINGER AT THE ADMINISTRATION FOR FEELING IT. >> WELL, YOU’RE RIGHT.

I MEAN, INFLATION, THE RATE OF GROWTH, HAS SLOWED BACK TO THE FEDERAL RESERVE’S TARGET, BUT THE LEVEL OF PRICES IS, OBVIOUSLY, A LOT HIGHER THAN IT WAS TWO OR THREE YEARS AGO IT WOULD BE LIKE FOR STAPLES, FOOD IS KIND OF AT THE TOP OF

THE LIST OF PAIN POINTS FOR MANY AMERICANS, PARTICULARLY LOWER AND MIDDLE-INCOME AMERICANS. RENT IS ALSO A LOT HIGHER. RENTS HAVE GONE FLAT TO DOWN OVER THE LAST YEAR OR SO, BUT THEY’RE STILL WAY ABOVE WHERE THEY WERE A COUPLE, THREE YEARS AGO. ENERGY ALSO TO SOME DEGREE

THE STAPLES THAT PEOPLE NEED, PRICES ARE A LOT HIGHER FOR THOSE THINGS I GET IT IT IS A LOT OF FINANCIAL PAIN. GOOD NEWS, THOUGH, IS THAT PEOPLE’S WAGES ACROSS THE WAGE DISTRIBUTION, HIGH WAGE, LOW WAGE WORKERS THEIR WAGES ARE RISING FASTER THAN THE RATE OF INFLATION.

WITH EACH PASSING MONTH THAT FINANCIAL STING THAT PEOPLE ARE FEELING SHOULD FEEL LESS PAINFUL GOING FORWARD. AND, YOU KNOW, I THINK SIX MONTHS FROM NOW, A YEAR FROM NOW, PEOPLE WON’T BE AS CONCERNED ABOUT INFLATION AS THEY WERE. NOW, REALLY QUICKLY TO YOUR POINT ABOUT BLAMING THE

ADMINISTRATION, I DON’T THINK THAT’S FAIR. I MEAN, I DO THINK EARLY ON WHEN WE GOT THE FISCAL SUPPORT, THAT DID SUPPORT AND JUICE UP INFLATION, BUT THAT WAS HARD TO REMEMBER BACK THEN, BUT BACK THEN, THAT WAS DESIRABLE INFLATION. WE HAD BEEN THROUGH A PERIOD OF

A DECADE OR MORE OF SUBOPTIMAL INFLATION AND WE GOT THE INFLATION THAT WE WERE ALL