FAST FIVE: How High Could Inflation Soar In Coming Months… And What Will The Fed Do
We are overloaded with orders and do not have the personnel to get product out the door on schedule.” (Primary Metals) Yet while executives at virtually all businesses are now openly panicking about soaring input prices, the Fed is not perhaps because the central planners hope that the burst in prices will be temporary (a function of trillions in stimulus) as wages once again fail to rebound along with costs.
To capture the coming economic overheating, Goldman simulates alternative 2021 inflation contributions from these categories under three scenarios.
In the first scenario (rows 5-6), GS economists assume price levels fully return to the pre-crisis trend by the end of this year.
The third and final scenario looks at what if mass vaccination and pent-up demand lead to a boom in travel and recreation consumption later this year.
To justify this view, Goldman reminds us of Powell's January press conference in which he said “Base effects.