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Bill Dudley

Four Reasons Not to Worry About U.S. Inflation

It’s probably headed higher, but that doesn’t mean it will get out of control.

Don’t worry, it’ll be OK.

Don’t worry, it’ll be OK.

Photographer: Archive Photos/Getty Images

I’ve lately been arguing that financial markets could be in for a surprise in the form of higher-than-expected U.S. inflation. But let me be clear: This doesn’t mean that it will spiral out of control or soon undermine the post-pandemic recovery.

Many forces are converging to push prices upward. The Biden administration and Congress are preparing a big fiscal stimulus package, and the Federal Reserve is aiming to provide enough monetary stimulus to push the inflation rate above its 2% long-term target. Meanwhile, the gradual easing of social distancing is set to release a lot of pent-up demand for everything from restaurants to travel and tourism, which recession-damaged businesses — many oriented toward a pre-pandemic economy — will initially struggle to satisfy.