Should We Worry About Inflation?
- The market sold off in February on concerns that the strong economy may overheat, inflation may spike, and the Federal Reserve (Fed) may then raise interest rates more aggressively to try and combat higher inflation.
- Inflation has been below the Fed’s target of 2% for years, and the Fed gave little hint in its latest report to Congress that it is prepared to raise U.S. interest rates more aggressively in 2018.
- Investors should focus on indicators such as consumer spending, economic growth as measured by Gross Domestic Product (GDP), corporate earning results, and the Fed’s monetary policy – all of which currently point to the economy’s ability to digest price increases. Inflation and resulting in price increases not need be significant concerns if we have a healthy and growing economy.