The debate over what’s causing prices to surge right now is simpler than you might think.
, new cars, rental cars, and airfare—those four categories basically drove half the inflation in May. The reasons for those things are all sort of quirky and they have to do with this bizarre point: We are in recovery from the pandemic, and strange supply chain issues have popped up.
I think there are a few different arguments going on that you need to separate from one another. The big one about inflation: Is this the beginning of a persistent problem? Meaning, is inflation going to take off and then continue to rise, or is this transitory? The Federal Reserve is going to come down on the transitory side of things—which is a fancy way of saying temporary. It’s just a blip.
There are a few different measures that actually show that traders and investors are getting less worried about inflation than they may have been last month. For one, Treasury yields have started to fall.Think of it as the return on a Treasury bond rate. Your yield is what you get back every month or every year from the government if you decide to loan it money.
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