The inflation numbers for April released on Wednesday show the Consumer Price Index rising by 4.2% compared to April 2020, higher than the Bloomberg consensus forecast of 3.6%. The core CPI, which excludes the volatile food and energy components, rose 3.0%, up from the 1.6% year-over-year rate of increase in March. This marks the first time since ... READ MORE >
inflation
Fed policy decision: Steady as U.S. economy at inflection point
The American economy has entered a period of recovery that will be followed by a robust expansion, leading it almost surely to the pre-pandemic level of output in the near term and a return to full employment in 2022. With the end of the pandemic in sight, the Federal Open Market Committee, at its meeting on Wednesday, noted an improvement in the rate of ... READ MORE >
Inflation expectations: Have they reached a peak?
One major theme this year, as the American and global economies reopen, is the risk of rising prices. The yield on the 10-year Treasury increased from 0.91% at the start of the year to a high of 1.74% on March 31. But over the past month, that yield has moved back down and is likely to return toward 1.45% in the near term. So why the retreat, and what ... READ MORE >
CHART OF THE DAY: Deflating the hype on inflation
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 ... READ MORE >
CHART OF THE DAY: Where in the world is wage push inflation?
Much of the talk about risks to the economic outlook has been linked to the prospect of higher inflation following more than $5 trillion in federal spending to address the pandemic. But what is often missing in that discussion is the link between price volatility and wages. It is difficult to make the case that inflation will increase because of a ... READ MORE >
Making sense of inflation: What we can learn from post-recession recoveries
It's a central tenet of economics: We should expect prices to increase when the demand for goods and services increases, and to decline when demand diminishes. Price rigidity and the presence of product choices will dictate the speed at which price changes occur. This has held up in our analysis of the postwar business cycles, which shows that inflation ... READ MORE >
U.S. February Consumer Price Index: Inflation to rise from a low base
Much of the recent discussion around risks to the domestic economic outlook revolves around inflation or the ghost of something that has not materially haunted the American economy during the past four decades. While year-ago base effects will cause top-line estimates of pricing to rise in the coming months, we expect a midyear peak in the CPI of 3.1% ... READ MORE >
CHART OF THE DAY: Amid talk about inflation, expectations have remained in check
The yield on 10-year Treasury bonds had been slowly rising by roughly 9 basis points per month since last summer as the prospects for a vaccine and the economy improved. But since the end of January, there has been a jump of 50 basis points, with 10-year yields twice breaching 1.5% and then 1.6% in the first week of March. This has set off a flurry ... READ MORE >
Flattening Phillips curve implies greater space to address economic needs
The traditional workhorse among policymakers attempting to estimate the tradeoff between employment and inflation has been the Phillips curve. During the past few decades, as the economy has shifted from one based on manufacturing to one based on information and digital technologies, this traditionally inverse relationship as shown in the Phillips curve ... READ MORE >
U.S. inflation outlook: Don’t believe the hype
The reflation of the American economy following the debilitating effects of the pandemic has begun. Recent increases in growth forecasts, the January jump in retail sales, trillions of dollars in fiscal aid and stimulus, as well as the prospect of a household-led boom over the next two years, have spurred a debate around the prospects for inflation and ... READ MORE >