July 14, 2021
GSFM’s Investment Strategist Stephen Miller writes for Investor Daily about the recent spike in inflation that has been largely disregarded by the US Federal Reserve (the Fed) and markets as transitory; he believes there are strong grounds for a less sanguine view.
Once inflation gathers pace, it can create a momentum of its own. History shows that once the inflation genie gets out of the bottle, it is difficult to contain, and putting it back in the bottle in a timely fashion almost impossible. This was shown starkly with the oil price shocks of the 1970s when government policy was to simply accommodate the increase in oil prices.
If supply shocks manifest themselves in higher inflation expectations, that can have an impact on purchasing behaviour, putting increased pressure on limited supply.