As the economy continues to recover and is poised for a period of robust expansion, the conversation continues to shift toward the outlook for inflation.
While we expect the year-ago effects brought on by the global pandemic to result in a period of moderate reflation in the economy, the longer-term outlook implies that elevated inflation will be transitory and give way to price stability.
The spread between the U.S. Treasury 10-year and 5-year breakeven rate—those rates used by bond investors to gauge inflation over a specified time horizon—supports this point as shorter-term inflation expectations exceed those over the long term.
While it is expected that prices will increase during a period of recovery, it is important not to get caught up in the noise surrounding short-term inflation and rather focus on the longer-term outlook.
For more information on how the coronavirus pandemic is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.