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Cathie Wood, chief executive at Ark Invest, said Tuesday that a deflation trend has begun in the U.S., which may compel the Federal Reserve to start cutting its key interest rate.
“The Fed has overdone it, and the greater risk here is deflation,” Wood told Bloomberg TV on Tuesday. “If we’re right, and they’ve gone way too far, they’ll have to cut fairly significantly,” Wood said.
Investors are starting to see deflationary trends in more sectors, starting with commodities, Wood said.
She expects the consumer price index number to continue to fall below the Fed’s 2% target.
“I think we’re gonna see a lot more deflation going forward. We are going to hit that 2% handle and we will go below it and we would not be surprised to see CPI inflation negative at some point next year,” Wood said.
The consumer price index was unchanged in October, while the annual rate of inflation slowed to 3.2% from 3.7% for the month.
U.S. stocks rose Wednesday morning, with the Dow Jones Industrial Average
DJIA
up 0.4%, according to FactSet data. The S&P 500
SPX
gained 0.5% and the Nasdaq Composite
COMP
advanced 0.6%.
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