Inflation Information
Lately, inflation has been a trending topic in the world of finance. After emerging from a year of being stuck in the house, American consumers are spending like crazy. The release of pent-up consumer demand combined with trillions in stimulus spending has investors on edge as they expect prices to rise. But the question remains; how much will this inflation rise?
The government’s primary measure for measuring inflation, the consumer price index (CPI), is predicted to climb by 0.5% in May. According to Dow Jones, the consensus projection for the core consumer price index (CPI), which excludes food and energy, is 3.5% year over year. This is the fastest yearly growth rate in the last 28 years.
The Headline CPI is forecast to rise 4.7% year over year, the highest rate since the fall of 2008, when sky-high oil costs pushed up inflation figures—the price of a barrel of oil reached as high as $150. The inflation report will be released this morning.
While investors expect some inflation, they aren’t sure if the inflation will be permanent or if it will be “transitory,” like the Federal Reserve believes. What does transitory inflation mean? The new buzzword coined by the Fed essentially means prices suppressed during the pandemic will continue to rise as the economy recovers.
What could become a dire threat to the economy is if the inflation isn’t transitory, but it persists. If inflation is here to stay, the fear is that the Federal Reserve will abandon its loose monetary policies, which have kept interest rates low, increased liquidity, and fueled stock market gains.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
