The U.S. economy may face deflation in the next six months, and the Fed may soon be forced to abandon its aggressive policy, said Ark Invest analyst Cathie Wood .
Fed officials have been fighting inflation all year and trying to bring it down from June's consumer price index reading of 9.1%, a 40-year high.
Prices fell slightly to 8.3% in August, but Fed officials said they would remain vigilant and raise rates until the data showed a significant decline. But that belligerence may not be necessary, Wood said, as demand in the economy is already starting to slow.
"We think that inflation during the years ahead is going to surprise significantly on the low side of expectations," she added, predicting a Fed pivot could be in sight.
She pointed to the downturn in energy markets when exorbitant prices drove demand for gasoline to a 25-year low. And while Fed officials remain aggressive on the consumer price index and unemployment rate, experts say those indicators lag behind actual inflation in the economy.
Meanwhile, indicators that account for most of the high inflation numbers are falling across the board, such as retail prices and commodity prices. According to JPMorgan, markets are also accounting for the decline in inflation, with inflation expected to be below 2 percent in 2024.
Other commentators have warned that excessive growth could send the economy into recession, but Wood thinks the U.S. is already in a recession.