'Dr. Doom' Nouriel Roubini Warns Inflation Could Surge Back to 6% and Push Treasury Yields Toward 8%— and He Has a List of Reasons Why

Nouriel Roubini, the economist who earned the nickname “Dr. Doom” after warning about the 2008 financial crisis, says inflation remains the biggest risk facing financial markets.

In an interview published Wednesday by Business Insider, Roubini warned consumer prices could climb back to 5% to 6%, pushing the benchmark 10-year Treasury yield toward 8%.

Why Roubini Sees Inflation Returning

Roubini said several long-term forces could keep inflation elevated even after recent signs of cooling. He pointed to geopolitical tensions, deglobalization, expanding government deficits, climate change and increasingly populist policies as structural drivers that could push prices higher over the coming years.

The economist said the U.S.-Iran conflict has already lifted oil and commodity prices, while growing trade barriers and protectionist policies are reversing decades of disinflation from globalization. He also warned that rising government borrowing and debt levels could add further inflationary pressure.

If inflation climbs to 5% to 6%, Roubini said the benchmark 10-year Treasury yield could move “closer to” 8%, compared with around 4.5% today. He added that increasing Treasury issuance without a matching rise in investor demand would likely push borrowing costs even higher.

Recent Inflation Has Improved

The warning comes despite encouraging inflation data.

The U.S. Bureau of Labor Statistics reported Tuesday that the Consumer Price Index rose 3.5% year over year in June, below economists’ expectations as lower energy prices helped cool overall inflation.

Federal Reserve Chair Kevin Warsh has also reiterated that inflation remains “too high” and said anyone expecting the central bank to tolerate inflation above its 2% target “would be disappointed,” reinforcing the Fed’s commitment to restoring price stability.

Roubini acknowledged that his outlook is more bearish than the prevailing market consensus. He noted that artificial intelligence could improve productivity over time and help offset some inflationary pressures, while the Federal Reserve’s commitment to price stability also remains a counterweight to his forecast.

Geopolitical Risks Remain in Focus

Roubini argued that geopolitical tensions remain one of the biggest long-term inflation risks, particularly through higher energy and commodity prices.

Those concerns come as U.S. federal debt has climbed to a record $39.4 trillion, with higher interest rates increasing the government’s borrowing costs. At the same time, about 10% of global refining capacity remains offline despite the Strait of Hormuz staying open, helping keep gasoline, diesel and jet fuel prices elevated even as crude oil trades well below its March peak.

While Roubini stopped short of predicting an imminent crisis, he argued that investors continue to underestimate the persistence of structural inflation and the long-term risks posed by higher government debt, geopolitical instability and supply-side disruptions.

Roubini made the comments as he launched a blockchain token backed by his Atlas America Fund, an ETF designed around his long-term inflation thesis that invests in short-term Treasurys, REITs, gold and commodities.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Image via Shutterstock