INFLATION RIPPLES THROUGH U.S. ECONOMY

The economy is rebounding as consumers express pent-up demand, but suppliers are unable to respond as quickly.
As a result, consumer prices shot up 2.6 percent in March, the biggest monthly jump since August 2018 and notably higher than the U.S. Federal Reserve’s 2-percent benchmark.
A broad array of items are in short supply, driving up prices across sectors.
Whirlpool freezers and washers are rising in price, the company has warned; Scotts Miracle-Gro will hike prices on its lawn and garden goods, it said.
Consumer products makers Kimberly-Clark and Procter & Gamble, and food companies Nestlè and KraftHeinz have announced plans to hike prices, as reported in previous Trends Journal issues. 
“Our overall goal is to cover cost increases,” Jon Moeller, Procter & Gamble COO, said in comments quoted by the Wall Street Journal.
Farmers are paying more for fuel and tools, raw materials are pricier for factories to buy, shipping containers are in short supply, trucking companies are raising pay to attract and hold scarce drivers, and consumers are seeing those costs pile up in their shopping baskets and credit card bills.
The cost of an apple at Topco’s supermarkets is up 10 to 20 percent, a company official noted.
As prices rose during the pandemic, many companies chose not to raise prices during an economic crisis and, instead, did away with coupons, discounts, and sales. Now those companies are seeking to regain lost revenue as the economy heats up, raising prices by as much as 10 percent, Chris Testa, president of United Natural Foods, told the WSJ. 
“We haven’t seen this type of inflation in many, many years,” Kellogg Co. CEO Steven Cahillane said in comments announcing his company’s forthcoming price hikes that were quoted by the WSJ.
TREND FORECAST: U.S. Federal Reserve hacks have said repeatedly that any inflation above 2 percent will be small and temporary as the reviving economy works out materials shortages and supply-chain kinks.
The Fed has vowed to not raise interest rates until the economy has restored full employment and inflation rises above 2 percent and shows clear signals of remaining there for an extended period.
We disagree. Inflation will continue to rise, especially as the U.S. dollar continues to fall. And the Fed will raise interest rates before their 2024 target. They may even raise them this year. Their decision to do so will depend on the equity markets. Should the stock market fall into bear territory, the Fed will keep rates low to stop it from crashing. Thus, in doing so, the cheap money flow will keep pushing inflation higher.