Is this the inflation we have been waiting for? With the Federal Reserve unwinding its $4.5 trillion balance sheet, and the printing press still operating 24/7, price inflation is beginning to accelerate, which could prompt the U.S. central bank to raise interest rates faster than expected.
According to new data from the Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) spiked 0.5 percent in January, up from 0.2 percent in December. The year-on-year CPI increase remained the same at 2.1 percent.
Last month, consumers pay more for healthcare, gasoline, and rental accommodations. Meanwhile, employers are paying their employees more, with average hourly earnings climbing 2.9 percent on an annual basis in January.
Gas prices rose 5.7 percent, food prices jumped 0.2 percent, hospital care increased 1.3 percent, and apparel price-tag spiked 1.7 percent.
The Dow Jones initially plunged 200 points on the news, but it has since pared those losses and is up 40 points. Gold, meanwhile, is trading $0.30 higher to $1,330.
Will the Fed pull the trigger on more than three rate hikes in 2018? It could be the 1980s all over again: significant rate hikes to combat inflation. This won’t bode well for the U.S. government and indebted consumers.
Guess this blows the entire “the markets are going up based on fundamentals” argument. It’s the only game in town with low interest rates. Still I think it will be a hard correction rather than a crash. The crash will come when the cancer that is our debt comes to it’s natural conclusion.