The Delphic message from the bond market

 The Delphic message from the bond market

Figures released last week showed the US consumer price index jumped 5 per cent in May from a year earlier, while core inflation (which excludes volatile food and energy prices) rose 3.8 per cent, the biggest annual jump since 1992.

This followed a strong 4.2 per cent inflation reading in the 12 months to April.

Pressure to wind back stimulus

Fed policymakers have argued that the rise in inflation will be “transitory”, and that it will subside once prices are no longer measured against last year’s pandemic-depressed levels, and once supply bottlenecks are sorted out.

But there is no doubt the string of high inflation readings put pressure on Fed officials to start discussing how they will start winding back some of the monetary stimulus they introduced in the early days of the pandemic.

Especially since the Fed’s updated growth forecasts will probably show that officials now expect the economy to grow faster this year than the…

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