Inflation Is Coming. That Might Even Be a Problem.
Upward pressure on prices is already easy to spot, and that’s before the Democrats take over.
We’re definitely not here yet.
Photographer: Anthony Potter Collection/Archive PhotosInflation is probably coming to the U.S. this year. The question is how much. Prices rising faster than the Fed’s 2% target would be welcome, but too much price growth could be a problem. If that happens, the Federal Reserve could be in a bind.
The Democrats’ surprising victory in the Georgia Senate elections this month is just part of the reason to expect prices to rise. Just the expectation that Democratic control of the White House and Congress will result in more spending on economic stimulus programs sent inflation expectations climbing above 2% last week for the first time since 2018. An increase in the supply of government bonds — which will finance the extra spending — pushes up yields, and the 10-year Treasury yield rose above 1% last Wednesday for the first time since the early days of the coronavirus pandemic.