March 22, 2021
We’ve already seen a very large rebound in goods prices with booming factory output and the case for inflation now depends on the services sector, which depends on herd immunity. The current US vaccination pace should get the country to herd immunity within 40 days. The immediate surge in growth will produce some punchy inflation data vs. easy comps. The Fed expects a Q2-Q3 inflation bounce will be transitory…of course it will be. But services prices tend to be stickier than goods prices and, as a result, we expect a gradual reflation process thereafter.