Consumers do not expect the spike in inflation will last long. That’s the conclusion of six economists from the New York Federal Reserve Bank. “Besides its tragic human toll, the pandemic has brought about extraordinary economic dislocation, including unprecedented supply and demand imbalances that have resulted in a sharp rise in inflation,” says a Thursday, Feb 14, post from the six economists who examine the results of a monthly survey of consumer expectations for inflation conducted by the New York Fed. 
“Our measures indicate that consumers seem to recognize the unusual nature of the current inflation experience,” concluded the economists. In December, the annual inflation rate hit a 40-year high. Last week, the Bureau of Economic Analysis reported inflation surged higher still, to a 7.5% annual rate in January, adding to inflation fears. In the early 1980s, inflation resulted in stiff rate hikes by the Federal Reserve, causing a long recession from July 1981 to November 1982. Recessions trigger bear markets. Which makes the New York Fed’s analysis of this monthly survey of consumer inflation expectations important and timely: Consumers in January expected a 5.8% inflation over the next 12 months, and a decline to 3.5% in three years. Although inflation is alarming, the Fed’s analysis is one of several signs the inflation spike will not last long. Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences. You should consult the appropriate financial professional regarding your specific circumstances. The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions. This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice. |