This transitory inflation, the lending giant says, could feed into 1940s and 1970s style stagflation.
The dire warning in the study concerning rising US inflation comes from the bank’s chief economist David Folkerts-Landau, the company’s head of economic research Peter Hooper, and thematic researcher Jim Reid.
These analysts believe that the rising inflation in the country could be a ticking time bomb, and the US central bank may feel consequences for delaying action.
Folkerts-Landau wrote in the report:
“The consequence of delay will be greater disruption of economic and financial activity than would otherwise be the case when the Fed does finally act. In turn, this could create a significant recession and set off a chain of financial distress around the world, particularly in emerging markets. However, the inflation may start a little later than most think, as economies are more fluid than they were last year being locked down.”
The belief is that consumers will surely spend at least some of their savings as economies reopen.
Prices of commodities in the US has surged according to a number of studies published in the last two months. Oil tapped a two-year high, the price of lumber jumped 377% in a year’s time, copper has risen to record highs, and even electronics are 10% more expensive across the board.
And US inflation fears are troubling foreign markets, particularly in Asia and Europe. These have been shaken due to American inflation data concerns.
Meanwhile, the cryptocurrency economy has not performed as most believed it would in the fact of inflation, while gold on the other hand has seen significant lift in value from the economic fears that are gripping the United States.
The report concludes that a lack of preparation for the return of inflation is concerning.
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