After recent declines in both headline and core #inflation, we saw today’s #CPI data stabilize somewhat with modest gains of 0.6% and 0.2% month-over-month in headline and core CPI, respectively.
We think 2020’s broadly #deflationary influences may well lead to somewhat higher rates of #inflation in 2021, but we’re likely to see year-over-year growth in core #CPI around or below the 1% level for several quarters.
As both #inflation data and #employment numbers begin the process of carving out a bottom in the coming months and slowly begin to recover, we think it will continue to be critical for the @federalreserve to focus on bolstering its lending and stabilizing initiatives.
Critical areas of focus are likely to be the #MainStreet lending program and further assistance to State and Local #municipalities, which are suffering with budgetary crises resulting from the #pandemic’s broad #economic fallout.
Finally, while the #Fed’s crisis response has credibly bridged the #economic gap caused by unprecedented lockdowns, the country was already facing secular headwinds to growth and #inflation pre-Covid; resulting from the long-term #demographic trend of population aging.
Thus, it is likely that #MonetaryPolicy will need to remain supportive even after the #Covid crisis abates, to ultimately achieve policymakers’ growth, #inflation and #employment targets.
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