MNI BRIEF: 'Inflation Scare' May Complicate Fed Communications

A pick-up in consumer prices through the spring as low year-ago base comparisons drop out of the annual calculations could trigger an "inflation scare" and leave the Federal Reserve with a communications problem, a former Fed analyst told MNI.

"It's easy to push back right now and say growth is pretty weak and the economy isn't in great shape and inflation is still below our target. So, talk to me in four months when the economy is accelerating, fiscal policy is healthy, and inflation is rising," said Eric Winograd, a former analyst at the New York Fed and now senior economist at AllianceBernstein. "It is going to be a communication challenge for sure," he added.

Massive global stimulus and the possibility of a sudden snap-back to growth as Covid vaccines are rolled out are prompting some investors and commentators to sharpen their focus on a pick-up – even a surge - in inflation, but extensive central bank contacts continue to tell MNI they see this as only a remote possibility.