Inflation Arrives. Is It ‘Transitory’?

The Federal Reserve Building in Washington, D.C.


Ting Shen for the Wall Street Journal

Congratulations to those who want higher inflation. You’ve got it. The U.S. on Friday reported a rise of 1% in producer prices for March, double the consensus prediction of economists. Prices are up 4.2% in the last year, with goods prices up 7%.

The year-over-year increase is higher in part because of low, pandemic-induced numbers from 2020. The recent acceleration is also related to constraints on the supply of goods, while demand surges as the pandemic eases and consumers spend their pent-up savings and government checks.

For these reasons, Federal Reserve economists say inflation will be “transitory,” receding later this year as supply constraints ease. Let’s hope they’re right. But the Fed may also be underestimating the impact of its wide-open monetary policies despite an economy that will boom as the pandemic lockdowns end and the jobless rate continues to fall at a rapid rate.

The yield on the 10-year Treasury note popped to 1.66% on Friday, though down from its peak for the day. Investors will be watching Tuesday’s report on consumer prices for more inflation clues. The U.S. has never before pursued government-spending and monetary expansion of this magnitude with a hot economy, and the Fed says it will wait for durable inflation to appear before changing. Good luck.

Journal Editorial Report: The week’s best and worst from Kim Strassel, Jason Riley, Jason Willick and Dan Henninger. Images: AP/Reuters/AFP/Getty Images Composite: Mark Kelly

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Appeared in the April 12, 2021, print edition.


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