Congratulations to those who want higher inflation. You understand. The US reported on Friday a 1% increase in production prices for March, double the consensus prediction of economists. Prices have risen by 4.2% in the last year, with commodity prices by 7%.
Year-on-year growth is higher in part due to the low number of pandemics induced by 2020. The recent acceleration is also linked to supply constraints, while demand is growing as the pandemic relaxes and consumers they spend their rewards. savings and government checks.
For these reasons, Federal Reserve economists say inflation will be “transient,” retreating later this year as supply constraints ease. Let’s hope they’re right. But the Fed could also underestimate the impact of its wide-ranging monetary policies, despite an economy that will grow as the pandemic ends, and the unemployment rate continues to fall rapidly.
The yield on the 10-year treasury bill rose to 1.66% on Friday, although it fell from its peak for that day. Investors will watch Tuesday’s consumer price report for more inflation indicators. The US has never pursued government spending and monetary expansion of this magnitude with a hot economy, and the Fed says it will wait for sustainable inflation to emerge before it changes. Luck.