The biggest question facing the US economy is when skyrocketing consumer prices will come back to earth. The emergence of the Delta variant only deepens that inflation mystery.
The hope is that inflation will cool off as the economy fully reopens, allowing supply to catch up with increasing demand. But the summer surge in Covid-19 cases is complicating that thinking. That’s because the Delta variant threatens to both ease pricing pressures in the short term — and worsen them in the long run. Covid alarm bells sounded on Wall Street on Monday, with the Dow sinking 726 points, or 2.1%. Markets rebounded swiftly on Tuesday and Wednesday, although the bond market is still signaling nervousness. Treasury yields dropped to the lowest level in nearly six months. The good news is that, for now at least, investors and economists say the Delta fears are probably overheated. They point to how vaccines remain highly effective (almost all Covid-19 deaths and hospitalizations are among non-vaccinated people) and there is little appetite for the shutdowns that wrecked the economy last year. « I don’t think this will derail the recovery, » David Kelly, chief global strategist at JPMorgan Funds, told CNN Business. Similarly, Mark Zandi, chief economist at Moody’s Analytics, isn’t downgrading his forecast for a booming economy. He pointed to how real-time economic indicators, including everything from OpenTable restaurant bookings to the number of travelers going through airport security screenings, haven’t softened.
