COVID | Monetary Policy & Inflation
Inflation Shocker – It’s the Pandemic, Stupid
- By Bilal Hafeez
- 3 min read
• The simplest explanation for the recent surge in US inflation is the pandemic, not the Fed’s balance sheet expansion. Once the pandemic eases, so will inflation.
The latest US CPI data for January showed headline CPI surge to 7.5% on an annual basis. Even core inflation, which excludes volatile items like energy and food prices, jumped to 6%. These are the highest rates since the early 1980s. The Fed has already pivoted to a hawkish stance and is signalling the rate-hiking cycle will start soon. After this data, markets expect the Fed to start with a 50bps hike at the next meeting on 16 March.
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