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Inflation Outlook for 2021

Inflation Outlook for 2021

June 03, 2021
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As our nation continues to recover from the effects of COVID-19, one economic trend has been capturing news attention as of late. Consumer prices are rising amidst economic recovery. In fact, the Consumer Price Index (CPI) rose 0.8% in April 2021, jumping by a greater-than-expected 4.2% year-over-year.1

With upward trending prices, an important question arises - Is the Federal Reserve ahead or behind in its monetary policy regarding inflation? Federal Reserve Chair Jerome Powell has said it could be a mistake to see inflation as a guest long overstaying its welcome.

“One-time increases in prices are likely to only have transitory effects on inflation,” Powell said. He added, “It will take some time before we see substantial further progress.”2

An important metric that we are keeping our eye on is the 10-yr Treasury bill rate. The rate (one gauge of inflation) peaked around 1.74% in mid-March.  Currently the rate is range bound between 1.55-1.65% and the market has handled this range in a calm fashion since March.  The key will be for the Fed to be patient enough to allow the rate to self-fluctuate; however, if the rate runs higher too fast the market may look to the Fed to backstop the volatility similarly to how the Fed acted in December of 2018 into January of 2019. 

With reports of rising prices and talks on inflation, it can be difficult to know how concerned one should be. In regards to your portfolio, this is another case in which focusing on your personal economy will likely be more beneficial than listening to the media buzz. We are carefully monitoring these inflationary barometers and adjusting portfolio allocations according to the longterm goals you have dictated to our firm. If you have any questions or concerns, I’m here to help you and your financial well-being stay the course. Call or email us with any questions or concerns you may have.

1. CNBC, May 12, 2021
2. CNBC.com, April 28, 2021

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.