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Consumers are relying less and less on devices such as cameras,
radios and televisions, and services such as taxis and stores,
replacing them with programs in their iPhones and other high-end
phones, according to Rick Rieder, BlackRock's chief investment
officer of global fixed income.
Companies like Amazon.com Inc, Netflix Inc and Uber Technologies
Inc [UBER.UL] have enticed consumers with convenience and low
prices through their phones. As a result, they have upended
traditional retailers, entertainment outlets and transportation
services, Rieder said in an article published on Wednesday.
"Technological innovation is disrupting traditional business
models of many industries, putting a lid on prices and
influencing inflation in the economy overall," he wrote.
The core rate of the consumer price index, the U.S. government's
broadest inflation gauge, increased 1.7 percent year-on-year in
May, the smallest such rise since May 2015, the Labor Department
said last week.
On Monday, Chicago Federal Reserve President Charles Evans, when
asked about Amazon's proposed $13.7 billion buyout of up-market
grocer Whole Foods Market Inc at an event in New York, said new
competitors with a technological edge entering in major
industries pose possible long-term implications that inflation
will remain low.
Some of the recent pullback in inflation also stemmed from lower
energy prices resulting from global oversupply, analysts said.
The recent softening of inflation has raised speculation on the
timing on the U.S. central bank's next rate increase. A few
policymakers including Evans have said it may be worthwhile for
the Fed to wait until year-end before considering another rate
hike.
Philadelphia Fed President Patrick Harker told the Financial
Times the Fed should defer its next hike until December.
In the meantime, this technological shift will likely persist,
Rieder said, making it difficult for inflation to meet the Fed's
2 percent target, which policymakers deem optimal to support
stable economic growth.
"This is an increasingly challenging paradigm to execute upon
today in the more modern commerce era we live in," Rieder said.
"We believe both investors and policymakers need to abandon an
overly rigid view of price change."
(Reporting by Richard Leong; Editing by Steve Orlofsky)
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