Warren Buffett: Berkshire Hathaway Seeing Substantial Inflation, Raising Prices

Mandatory Credit: Photo by Nati Harnik/AP/Shutterstock (9665074s)Berkshire Hathaway Chairman and CEO Warren Buffett smiles during an interview in Omaha, Neb.
Nati Harnik/AP/Shutterstock / Nati Harnik/AP/Shutterstock

Supply chain strains and increasing demand have contributed to increasing prices over the past year, which has caused fears of rising inflation and calls for the Fed to intervene. Surging home prices and shortages of the supplies to build them have also put an upward strain on prices, worrying Wall Street further about where price levels will go overall.

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In a virtual address to shareholders, Buffet claimed ” This has been a very unusual recession … Right now, business really is very good in a great many segments of the economy.”

Some of these segments include the housing sector and stock market. Both experienced a boom in 2020 that is continuing well into 2021. Household incomes also rose by the most in history in March, largely due to stimulus payments, and the labor market is well on its way to recovery.

Still, this stimulation has caused an unusual acceleration in prices. The cost of lumber and steel, for example has soared. Some reasons for this include a shortage of supply in the face of increased demand that can not be satisfied. Along with home purchases, home renovations have also soared during the pandemic, and the demand for raw materials has not kept up. The pandemic also constricted the movement of these supplies, as supply chains were disrupted significantly, also affecting prices.

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Buffett added, “It’s very interesting. We’re raising prices. People are raising prices to us and it’s being accepted.” He added, “It just won’t stop. People have money in their pocket and they’ll pay the higher prices.”

Despite this, the Fed is still sticking by its stance that inflation indicators are temporary. Fed chair Jerome Powell has stood firm for the past couple of months that a rise in prices is a temporary side effect while the economy recovers.

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According to AP News, “Powell’s bet is that the Fed can keep rates ultra-low even as the U.S. economic recovery kicks into high gear — and that it won’t have to quickly raise rates to stop runaway inflation.”

AP added that in the past, this kind of gamble has led some of Powell’s predecessors to miscalculate and “inadvertently derail the economy.”

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About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 

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