Is the US CPI a shock?

About the author:

Michael Knox
Author name:
By Michael Knox
Job title:
Chief Economist and Director of Strategy
Date posted:
14 May 2021, 11:30 AM

The recently reported Consumer Price Index (CPI) was way higher than anticipated. I explain why in my latest podcast.

"What we have is a short-term surge in energy and used-car prices because a year ago (due to COVID19) the price of those fell to very low or even negative numbers. Now that the US economy is opening up again and people are driving again, we have a surge in those prices and that generates a short-term kick in inflation in the US.

Is this going to be a problem for the Federal Reserve? We think not.

It is wage inflation which will eventually generate price inflation but that won't happen until unemployment is much lower than it currently is, which won't happen this year or next year, but it will happen."

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