October 26, 2021

Stagflation Scare Is Putting Pressure on the Fed

The stagflation scare is gathering momentum which increases the odds of a Fed policy mistake that will boost volatility and flatten the yield curve. The Chart shows that there has been an avalanche of “stagflation” articles in the media. Consensus forecasts for inflation are getting revised higher, even as growth forecasts are getting revised lower. Meanwhile, stocks viewed as inflation hedges have broken out to the upside. Needless to say, the Fed has failed to convince financial markets that imminent QE tapering has nothing to do with the timing of the first Fed rate hike.