Why Surprise Inflation Could Push Fed to Ease Even More
The central bank isn’t going to allow bond vigilantism to imperil this economic recovery.
Keeping bond vigilantes in check.
Photographer: Susan Walsh/Pool/AFP/Getty Images
The fear of inflation in the U.S. is palpable.
Last week, former Federal Reserve Bank of New York President Bill Dudley gave five reasons to worry about faster price growth in the U.S. in a Bloomberg Opinion column. Ray Dalio, the founder of Bridgewater Associates, cautioned this week that a “flood of money” was unlikely to recede. Jeffrey Gundlach, DoubleLine Capital’s chief investment officer, said in a webcast that inflation is headed to the 2.25% range in 2021 and could reach 2.4%. Others think it could go even higher. My colleague John Authers made the case that a unique confluence of Covid-19 related circumstances, from a surge in home prices to a sharp decline in household debt-service ratios, sets the stage for a potential generational boom in inflation.