Foreign media reports, investors should beware of the “base effect” (base effect) to be powerful! Some experts predict that the U.S. Inflation data will rise sharply in the next few months, that is, inflation has come to a turning point, fearing that the self-fulfilling prophecy effect (self-fulfilling prophecy) will make inflation soar, because the outbreak of the Epidemic last spring so that U.S. prices plummeted. Since the inflation data is compared with last year, inflation is expected to rise much more in the next few months than before.
Peter Berezin, chief global strategist at BCA Research, believes that news of a spike in inflation could send markets into shock, and that inflation could lead to a “self-fulfilling prophecy,” meaning that if everyone expects prices to keep rising, they will go on a buying spree, setting off a rush to buy goods. The “self-fulfilling prophecy” is that if everyone expects prices to keep rising, they will go on a buying spree, triggering a rush. Imagine last year’s toilet paper shortage becoming a full-blown economy-wide phenomenon.
Investors are worried about inflation because they fear that soaring prices will prompt the Federal Reserve to tighten monetary policy, which will in turn hit the stock market. In order to appease the market, the authorities stressed the change to an average inflation rate of 2% target. To make up for years of inflation not reaching 2%, the authorities are willing to tolerate inflation above 2% for a period of Time and imply that interest rates will not change for at least the next three years.
However, Biden‘s massive bailout and vaccination may change this situation. Bank of America Securities global economist Ethan Harris and others reported this week that if Congress passes Biden’s $1.9 trillion bailout, the “excess” savings will amount to $2 trillion, and there is no relevant historical experience to assess how the economy will emerge from the epidemic and return to normal.
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