What about inflation?

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The real worry right now should be deflation, as we have not yet beaten back all of the ill deflationary effects of the financial crisis.  Nevertheless, a growing number of market participants see inflation as a longer term worry.  With unemployment high, a cost-wage push will not be part of that equation.  Nevertheless, increases in food, oil and commodity prices could create problems down the line as this Bloomberg News video on milk prices attests – they are talking about a doubling in milk prices in 2010.

 

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And, remember, before 2007, $70 was an unheard of, recession-inducing price for a barrel of oil.  Yet, in the midst of a deep, deep global recession, we have $70 oil.  What does that tell you about likely prices in a recovery?  Is it too early to worry about inflation?

Sources
Dairy-Cow Kill to Double Milk Price on Biggest Slump Since 1980 – Bloomberg

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