Is inflation coming?
Markets are now beginning to price in the possibility that meaningful inflation returns to the US economy. The 10-year breakeven inflation rate, which is essentially a market measure of future inflation expectations based on US treasury yields, has been rising ever since March of last year, when expectations plummeted at the start of the pandemic.
After pumping so much stimulus into the economy it's perhaps no surprise that investors are expecting inflation to make a comeback. The worry is that the economy could begin to overheat, and inflation could start to spiral higher.
How would inflation affect me?
Over the long term inflation erodes the purchasing power of your income, but assuming that it's only a few % a year that can take some years to feel noticeable. Instead higher inflation is much more likely to trigger some more dramatic moves in the stock market, or housing sector, if the Federal Reserve decides to raise interest rates to combat it. For now though they seem pretty chilled about it.
