Although Fed Dismisses Inflation Risk, Warren Buffett Sees Substantial Inflation And Is Raising Prices

Although Fed Dismisses Inflation Risk, Warren Buffett Sees Substantial Inflation And Is Raising Prices

Warren Buffett, chairman and CEO of Berkshire Hathaway, participates in a newspaper tossing competition in Omaha, Neb., May 5, 2012. (AP Photo/Nati Harnik)

Billionaire Warren Buffet says he has seen substantial inflation that has forced his companies held by Berkshire Hathaway and others to raise prices.

The “Oracle of Omaha” has joined a growing list of business executives who say serious levels of inflation are starting to take hold as the U.S. economy roars back from the Covid-19 downturn, according to a Yahoo Finance report.

“We’re seeing very substantial inflation,” said the 90-year-old Berkshire Hathaway chair. “It’s very interesting. We’re raising prices. People are raising prices to us and it’s being accepted.”

Federal Reserve chairman Jerome H. Powell has downplayed inflation risks. He and Treasury Secretary Janet L. Yellen, the former Fed chairwoman, testified on March 24 before the House Financial Services Committee. “We do expect that inflation will move up over the course of this year,” Powell said. “Our best view is that the effect on inflation will be neither particularly large nor persistent.”

Berkshire Hathaway, which owns insurer Geico, railroad BNSF and Benjamin Moore, the paint maker, reported $11.7 billion in profits, with some divisions disclosing price rises to keep pace with the increased costs of raw materials.

Buffett and Berkshire Hathaway ownmore than 65 different companies, with 47 percent of the portfolio in financial services, and 27 percent in technology companies.

The holding company used most of the first quarter to book profits and Q1 net stock sales were the highest in five years, per Berkshire Hathaway’s earnings report.

Kleenex maker Kimberly-Clark said, starting June, it will increase prices in the U.S. and Canada on the majority of its consumer products due to “significant” commodity cost inflation.

The U.S. Federal Reserve has set a 2-percent target for inflation in 2021 but expects a temporary period of high inflation which it anticipates will subside later in the year. Buffet and others say inflation could be hotter than the central bank expects.

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“People have money in their pocket, and they pay higher prices… it’s almost a buying frenzy,” Buffett said, noting that the economy is “red hot.”

Jeanna Smialek, the Federal Reserve and economy analyst at The New York Times, wrote that consumer prices are expected to spike in the coming months as supply chains experience short-term reopening bottlenecks.

“The unknowns facing the Fed, and the investment world, are how big the jump will be and how long it will last,” Smialek added.

Read more: 7 Prices In The U.S. Economy That Are Spiking While Federal Reserve Dismisses Inflation Risks