Congratulations to those who want higher inflation. You got it. The United States reported a 1% rise in producer prices in March on Friday, double the consensus forecast by economists. Prices have risen 4.2% in the last year, and commodity prices rose 7%.
The year-on-year increase is higher in part due to the low pandemic-induced figures from 2020. The recent acceleration is also related to the constraints on the supply of goods, while demand increases as the pandemic increases. pandemic relaxes and consumers spend their accumulation savings and government checks.
For these reasons, Federal Reserve economists say inflation will be “transient,” retreating later this year as supply constraints are eased. We hope they are right. But the Fed may also be underestimating the impact of its open monetary policies despite an economy that will grow as the pandemic blockades end and the unemployment rate continues to fall at a rapid pace.
The yield on the 10-year Treasury bill reached 1.66% on Friday, although it fell below its daily high. Investors will see Tuesday’s report on consumer prices for more clues to inflation. The United States had never pursued government spending and monetary expansion of this magnitude with a hot economy, and the Fed says it will wait for lasting inflation to emerge before it changes. Good luck.