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Jump of inflation above expected paces stated by experts may become unexpected surprise this year for the US. However, neutrality of the Fed on the background of rising prices may be also unexpected step of monetary policy.
Investors had concerns just a month ago that another cold way from external markets may calm down inflation, making it difficult to achieve target 2%. Expectations that are put in yield of treasury bonds, which are not under influence of inflation, meant the inflation will be at 1.18% in the next 10 years. Then this level was shifted to 1.61%. It has happened along with growth of inflation expectations of population released on Friday.
Increase of these expectations demonstrates not only reduction of external pressure, but shows stronger inflation pressure reflected in economic indices. For instance, according to data released in previous week, core inflation without prices for food and energy was fixed at 2.3% in previous month. This corresponds to growth of prices by 1.7%. This index has also reached its 4-year extremum.
However, the Fed showed its liability to moderate monetary policy at the last meeting. Now the Fed expects two rate hikes this year against initial four hikes and three hikes expected during the last three months. This backward step means that sensitivity to external factors and market instability rose. Here can also be meant an intention to be behind inflation and not to outgo it.
Nevertheless, less people expect inflation to jump sharply, but the inflation may be significantly higher by the end of the year than now.