Markets were lower by midday on Thursday as the Dow shed 500 points. Investors nervously watched the yield on the ten-year Treasury note as it climbed to slightly more than 1.5%.
Fed chief Jerome Powell has insisted that the economy still has a “way to go” and this week signaled that the Central Bank remained unconcerned with inflation during his two-day semi-annual testimony before Congress on Tuesday and Wednesday.
Nonetheless, the reality of a creep up in inflation is real. From recent PPI data (which indicates a rise in producer prices) to recent signs of strength both in retails sales numbers and today’s durable goods report, there are meaningful indications of better times ahead.
A better economy might cause the Federal Reserve to pull back on its stimulus efforts. Meanwhile, a stronger economy in the here and now, combined with the increasing availability of vaccines, might result in less fiscal stimulus as well.
Why would the Biden Administration need $1.9 trillion if, in fact, the economy is already recovering?