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Consumers at Breaking Point as Fed's Inflation Battle Heats Up, Investor Peter Boockvar Warns

Shoppers inside a grocery store in San Francisco, California, U.S., on Monday, May 2, 2022.
David Paul Morris | Bloomberg | Getty Images

The economy may be hitting a crucial turning point.

Investor Peter Boockvar warns the Federal Reserve will not be able to meaningfully contain surging inflation, and there's not much more consumers can withstand.

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"It gets to the question: At what point does the consumer blink in the face of these rising prices," the Bleakley Advisory Group CIO told CNBC's "Fast Money" on Wednesday. "On the low-end consumer, they're already beginning to blink."

A TransUnion study out this week reflects trouble among consumers with the "riskiest credit profiles" in the form of rising trend credit balances and delinquency rates.

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Boockvar believes the report is a harbinger of what's ahead. In a note out this week, he warned consumers are at a "fork in the road."

"The consumer is going to call a timeout on spending because of the continued rise in prices," he wrote. "It is inevitable as price matters to the U.S. consumer who loves discounts."

Boockvar, a Fed critic, believes all income levels are at a breaking point. He warns they're on the cusp of delaying purchases until prices cool — which would have painful consequences on the broader economy. It would put Fed Chair Jerome Powell's view that it's possible to avert a recession at risk.

"This is going to be the most aggressive tightening cycle in 40-plus years between the rate hikes and the shrinking of the balance sheet," noted Boockvar, a CNBC contributor. "Considering how dependent economic activity is to cheap money, how dependent markets have been to cheap money, I don't see how it's possible to achieve a soft landing."

Yet, Wall Street appeared to embraced the Fed's half point rate hike and Powell news conference. The S&P 500 saw its best day since May 2020.

Boockvar expects the bounce to evaporate.

"If there are low odds of a soft landing, which means we're going to have a recession, well that means that earnings numbers are going to have to come down," Boockvar said.

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