Inflation scares could intensify next week. US figures on Tuesday could show that the overall consumer price inflation rate has risen to over 5 per cent, its fastest rate sine 2008. And the rate excluding food and energy could exceed 4 per cent, the highest since 1991.
The question is: how longlasting will this inflation be? It won’t disappear soon: surveys by the New York and Philadelphia Federal Reserves will show that firms are still reporting big price increases, amid strong growth in output – the latter being confirmed by official figures on industrial production on Thursday.
On the other hand, though, high annual inflation is partly due to unusually low prices (especially of oil) last summer: that base effect will fade in coming months. And Friday’s data could show that retail sales aren’t much higher than they were in March, suggesting that a good chunk of the stimulus cheques have been used to add to savings or reduce debt. With demand moderating so too eventually might inflation.