Warren Buffett predicts ‘red hot’ US inflation as economy takes off

Billionaire investor Warren Buffett is predicting a “red hot” US recovery from the Covid pandemic, but has warned the economy is being hit by rising inflation. Mr Buffett, known as the “Sage of Omaha” for his savvy stock picking, said the coronavirus crisis had sparked a highly unusual recession because so many businesses had continued to thrive. But although he expects a rapid recovery, Mr Buffett also fears that inflation will rapidly pick up in a way that America has not experienced for over a decade. He said: “This economy right now – 85pc of it is running in a super high gear. We’re seeing very substantial inflation.” Rapidly rising prices are viewed with concern by investors as they can eat into returns, drive up interest rates and potentially cause long-term damage to the economy and living standards by eroding the value of workers’ wages. Inflation has not been a challenge in the West since before the financial crisis. However, speaking as his investment firm Berkshire Hathaway announced $11.7bn in profits, 90-year-old Mr Buffett said that overall the economy is currently in good shape. He said: “Right now, business really is very good in a great many segments of the economy.” Berkshire Hathaway has significant stakes in some of the world’s biggest companies, such as Apple and Kraft Heinz. Remarks made by Mr Buffett, who boasts a net worth of $104bn, are carefully monitored by stock markets around the world for his predictions. Flanked by Charlie Munger, vice chairman of Berkshire Hathaway, he also joined to a growing number of critics of special-purpose acquisition companies (SPACs), also known as “black cheque” entities. These businesses raise cash from investors to buy a private company – typically without telling shareholders what the target is. Spacs have been publicised by the likes of tennis star Serena Williams, and it is feared a bubble has built up which could lead to massive losses for some retail investors.