MNI BRIEF: Permanent Higher Inflation A Risk: SL Fed Economist

Inflation is likely to spike above the Fed's target later in the year and the big question for policymakers is whether "that spike is temporary or persistent," St. Louis Fed economist and senior vice president David Andolfatto told MNI in an exclusive interview published Wednesday. Although not seeing a surge in prices, suggesting a rise to 2.5% at some point in 2021, he warns there is significant chance of a more permanent rise.

Amongst the biggest risk he highlights is the potential speed at which stickier inflation can creep in. If long yields and break-evens edge higher, its observable and manageable, Andolfatto says, but if the move is more sudden "as policy makers or central bankers you have to ask what if and what would you do in that case."

Until now, many central bankers have played down inflation risks. On Wednesday, Cleveland Fed President Loretta Mester said "structural pressures" will likely weigh on prices.