FAST FIVE: BofA Just Threw Up All Over The Fed's "Transitory" Argument: Here's Why

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And yet, the evidence of shortages and inflation continues to grow with every passing day, as does the list of reasons to dismiss the problem as purely temporary, although as even BofA economists note in their daily note, “judging from the non-reaction of markets- with 10-year yields dipping back below 1.5% and the stock market near record highs- those arguments are winning the day.” BofA's response was simple: as the bank's chief economist Michelle Meyer said “we don't buy it”, noting that as signs of shortages and inflation continue to arrive, including several warnings this week, “individually the arguments for complacency make sense; collectively they are becoming increasingly unconvincing”; it's also why Meyer continues to believe that “the groundwork for more sustained inflation down the road is building.” She does have a point – after all, just this week, we found that both the small business survey and the “JOLTS” data showed a significant escalation of the shortage problem in May.

All of the small business questions around prices, wages and shortages worsened on the month.

Bottlenecks in trade will also ease as the impact of past disruptions fades, labor shortages ease and demand for goods stops growing so fast.

The rise in prices is purely temporary and sector specific.

Any increase in wage growth is by definition temporary because the unemployment rate is still too high to generate sustained wage pressure.

Categories: ZH