Your Bills Are About to Go Up — The Fed Can’t Stop It - Prof G Markets Recap

Podcast: Prof G Markets

Published: 2026-03-19

Guests: Michael Gapin, Robert Armstrong

What Happened

Meta invested a staggering $80 billion into its Metaverse platform Horizon Worlds before ultimately deciding to shut it down. This decision highlights the volatility and uncertainty in tech investments, especially in nascent fields like virtual reality.

The Federal Reserve announced a decision to hold interest rates steady, a move that was widely anticipated with a 99% expectation. This decision comes amidst rising inflation, with the producer price index showing a 3.4% year-over-year increase, marking its largest annual gain in a year.

Core inflation, excluding food and energy, presents a 3.9% rise in the producer price index, while personal consumption expenditures indicate a 3.1% year-over-year increase. The economic landscape is further complicated by geopolitical tensions, such as the recent U.S. strike on Iran, which led to a 40% surge in oil prices and a significant increase in gas prices.

Michael Gapin from Morgan Stanley and Robert Armstrong from the Financial Times discussed the current inflation outlook, noting the challenges posed by these geopolitical events. The Federal Reserve's dot plot suggests no rate increases this year, with some predictions pointing to rate cuts by 2026.

The rise in oil prices has directly impacted gasoline prices in the U.S., which have increased by 50 cents to a dollar per gallon nationwide. This increase is expected to affect consumer spending, as transportation costs account for 40% of food prices in grocery stores.

Despite these inflationary pressures, the five-year, five-year forward inflation break-evens have remained stable since the war's onset, suggesting long-term inflation expectations are unchanged. The Fed's updated projections anticipate headline inflation close to 3% by year's end, with core inflation around 2.7%.

Michael Gapin rates the current U.S. economy as a B plus, pointing to good GDP growth and low unemployment. However, he notes stretched household budgets and a lack of labor market dynamism, which could lead to a modest form of stagflation, reminiscent of the 1970s.

Robert Armstrong highlights the disparity between consumer surveys and macroeconomic data, where surveys show mixed results while macro data indicates less concern. AI-related business spending and productivity gains are providing some support to the U.S. economy amid these challenges.

Key Insights

• Meta's $80 billion investment in Horizon Worlds highlights the challenges and risks involved in tech investments, particularly in emerging sectors like the Metaverse.
• The Federal Reserve's decision to hold interest rates steady reflects a cautious approach in the face of rising inflation, with the producer price index increasing 3.4% year-over-year.
• Geopolitical tensions, such as the U.S. strike on Iran, have led to a 40% increase in oil prices and significant rises in gas prices, impacting consumer spending and transportation costs.
• Long-term inflation expectations remain stable despite current pressures, with the Fed projecting headline inflation close to 3% by the end of the year.