In the view of the analysts at the ING bank, “the Fed believes there is enough spare capacity in the economy to dampen price pressures.”
Key quotes
“Annual rates will start to rise quickly though in March-July as price pressures in a depressed, locked down economy 12 months ago are compared with price levels in a vibrant re-opening economy in 2021.”
“We expect to see headline inflation move above 3.5% in 2Q which could lead to a change in language from the Fed at the June FOMC meeting surrounding the prospects for a tapering of asset purchases.”
“We also think inflation could be stickier due to improved corporate pricing power in a supply-constrained economy.”
“This will not begin until March.”
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