2017 May Again Be the Year for Comeback of Inflation

2017 May Again Be the Year for Comeback of Inflation

As per recent reports, 2017 could be the year when the worries regarding inflation could again churn for probably the first time after many years. There had always been a tension regarding inflation and the stock market could catch a hint of inflation in the latter part of 2017. Experts predict some headwinds in the market during the second portion of the year when people will worry about wage inflation in 2018 and the Federal Reserve playing a role behind shaping the curve. No, there aren’t going to be realities but people will get worried about inflationary pressures during the end of the year and this will rise predominantly from wages.

Data on US inflation for December 2016 which was revealed by the Bureau of Labor Statistics revealed that the CPI or Consumer Price Index increased by 2.4% year after year, which was later on followed by 1.8% rise in the previous month. Data was completely in accordance with expectations of the market and it marks the 5th continuous monthly profit in CPI with the backdrop of increasing housing costs and burgeoning energy prices.

Rising costs of energy are one among the prevalent factors which contribute to the rise of consumer prices due to the improvement in crude oil prices which in turn boosts the price of gasoline. Reports and statistics from the EIA or the Energy Information Administration show that the cost for 1 gallon gasoline has increased by about $0.30 during the latter half of December, 2016, as compared a year back. Consumer Price Index for the month of December also rose for majority of the items with less energy and food which is called core inflation.

Increased prices will mean an increase in Federal Reserve rate

There are many economists which anticipate that the Fed may require responding to the increasing inflation which rose from an interest rate hike in 2017. Janet Yellen, chairwoman of Federal Reserve said that after spending more than 10 years of seeking the advantages from monetary easing measures, the American economy has almost reached its objectives of the Fed, thereby implying that there is a chance for interest rates to increase in the US.

As per Bloomberg, the makers of Fed policy are considering an even better increase in interest rate and will be boosted by the advancement in the standard of living costs, which is a signal of the fact that they are treading to their goal of 2%. The futures contracts of Fed Funds are presently pricing at nearly 50% chances that the Federal Reserve will increase interest rates once by 2017 June.

Hence, the chief investment officer of an eminent New York based firm predicts a strong possibility of inflation coming back yet again. There are strong possibilities that it could occur very quickly but it may also be possible that some of the financial assets have gone way ahead of the way they usually perform.

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