How to Make Sense of the Surprising Inflation Signals

We’ve been told for years that inflation has been too low. Now that it’s finally reached and surpassed the Federal Reserve’s 2% target, it looks as scary as the fast-growing carnivorous plant in Little Shop of Horrors.

Iron, copper, lumber, cotton, computer chips, and gasoline are jumping in price. The dollar has weakened, making imports more costly. Employers are having to raise wages to fill record openings; the federal government is spending heavily; and consumers emerging from the pandemic are in the mood to light some money on fire. On May 12 the U.S. Bureau of Labor Statistics reported that consumer prices rose 0.8% in April from March, four times the median expectation and the most since 2009. Excluding food and energy the increase was 0.9%, the most since 1982.