Inflation is ‘always going to be a risk’ with the U.S. economy now fundamentally changed, ADP chief economist says

Inflation is “always going to be a risk” in the U.S. due to structural changes in the labor market, according to Nela Richardson, chief economist at payroll processing firm ADP.

Last year, with inflation spiraling out of control across major economies in the aftermath of the Covid-19 pandemic, the U.S. Federal Reserve began a run of interest rates hikes that would take the Fed funds rate target range from 0.25-0.5% in March 2022 to a 22-year high of 5.25-5.5% in July 2023.

Prior to that, interest rates had remained low for a decade as central banks around the world looked to stimulate their respective economies in the wake of the global financial crisis.

Speaking to CNBC’s “Squawk Box Europe” on Friday, Richardson said the past 10 years of U.S. economic growth had been driven by low interest rates as policymakers focused on negating recession in the absence of inflationary pressures.

“This was an economy built on very close to zero interest rates for 10 years of economic expansion, and that was OK because inflation was super low,” she said.

“But now inflation has awakened, and if you look at demographic trends, labor shortages are not going away. It’s getting better but that’s a structural change in the labor market because of the aging of the U.S. population, so what that means is inflation is always going to be a risk, it’s going to prop up, and so going back to zero or near rock bottom interest rates is going to be difficult to support the economy.”

Richardson added that the “training wheels have come off” the U.S. economy and that both businesses and consumers are now having to “ride a regular bike.”

Despite fears of a recession on the back…