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Elon Musk has gone from worrying about inflation to worrying about the opposite awfully fast

·3 min read

What a difference five months can make.

In April, Elon Musk told analysts that he believed inflation was worse than was being reported at the time and would likely continue through 2022.

Now he's singing (or tweeting) a different tune.

The Tesla CEO is now worried that a major interest rate hike by the Federal Reserve could kick off deflation. “A major Fed rate hike risks deflation,” Musk tweeted on Friday without elaborating further.

Just a month ago, at Tesla’s annual shareholder meeting in August, Musk said the economy was past its worst period of inflation, noting that the cost of most of the commodities and parts that go into Tesla’s cars would decline in the upcoming six months. The inflation reported in the consumer price index indeed hit a year-over-year peak of 9.1% in June before slightly declining to 8.5% in July.

“The trend is down, which suggests we are past peak inflation,” Musk said at the meeting, Bloomberg reported. He said he thought inflation would “drop rapidly” and that he expected only a “mild recession” in the next 18 months.

In July, when Tesla released its second-quarter earnings, Musk had hinted that inflation would likely decline toward the end of 2022 but told investors to take that prediction with caution.

“Making economic prognostication is fraught with error,” he said.

Musk’s latest comment about deflation comes as the Federal Reserve aggressively hikes interest rates as it tries to cool the economy and control inflation, which touched a 40-year high in June. After being near zero in March, the Fed’s rate now stands at 2.5% after two rate increases. The Fed may roll out a third hike at a meeting set to take place later this month.

Musk’s tweet warns that if interest rates are increased yet again, it could send prices down dramatically. When consumers expect prices to decline, they often delay making purchases until when they think prices will be lower, dampening overall demand.

Musk, the world’s richest person, is probably right in giving investors some hope regarding easing commodity prices. For instance, the price of aluminum, an essential metal used in electric vehicle manufacturing, has dropped 18.7% since the start of this year.

This could affect whether consumers buy Teslas now or push the purchases to later when EVs may cost less. Tesla raised prices for its cars in the U.S. multiple times this year, most recently in June, citing supply-chain snarls and the high cost of raw materials.

Musk isn’t the only one worried about deflation. Cathie Wood of investment fund Ark Investment Management has said deflation is on the horizon, one reason being the monetary policy. Wood argues that technological progress would lower the cost of production and, as a result, prices.

There is currently a major debate about whether the economy has entered a recession. But the answer is unlikely to be clear for several months.

Tesla reported better-than-expected earnings last quarter despite continuing supply-chain pains. Musk maintained that the year's second half could see improvement on that front. The Inflation Reduction Act announced by the Biden administration in August offers a massive boost to the EV industry and, of course, to Tesla. In fact, CFRA Analyst Garrett Nelson sees Tesla as the biggest winner, Barron’s reported, as buyers of its cars will be eligible for a $7,500 tax credit.

This story was originally featured on Fortune.com