Inflation countdown: CPI could run hot

Why it’s important to have inflation hedges in your portfolio, according to wealth adviser

Kaltbaum Capital Management President Gary Kaltbaum, Gibbs Wealth Management President Erin Gibbs and Payne Capital Management senior wealth adviser Courtney Dominguez discuss the markets. 

The most important economic report, since the April jobs report, will be released Wednesday morning.

All eyes will be on the April consumer price index as markets continue to reel amid worries about inflation.

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The Bureau of Labor Statistics is expected to say the CPI rose 0.2% month-over-month in April, below February’s 0.6% spike. 

On a year-over-year basis watch for prices to jump 3.6%. That would be the fastest growth in almost a decade and up a full percentage point from March’s 2.6% rise. 

 If you factor out volatile food and energy costs, the core consumer price index likely rose 0.3% last month and is expected to increase 2.3% annually.

 Federal Reserve Chairman Jerome Powell's bet is that the Fed can keep rates ultra-low even as the U.S. economic recovery kicks into high gear — and that it won't have to quickly raise rates to stop runaway inflation.

POWELL'S HIGH-STAKES BET: MORE JOBS BUT ONLY MILD INFLATION

Powell and the rest of the Fed's policymaking committee plan to keep rates near zero until nearly everyone who wants a job has one, even after inflation has crept above their 2% annual target level.

The Fed has said the U.S. economy will be allowed to "run hot" to ensure a recovery is established. 

"Liquidity might go in and create an inflation problem. I find myself actually agreeing with Fed officials that we are probably going to see a trends transitory inflation problem. But I'm very upbeat on productivity," said Ed Yardini, President of Yardini Research. "I think productivity has already been making a comeback before the pandemic, and I think it continues to do so maybe in an accelerated fashion."

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 Investors have worried about inflation since bond yields spiked earlier this year, though yields have mostly stabilized since then. The yield on the 10-year Treasury held edged up to 1.62% Wednesday from 1.61% on Tuesday.
  

The Associated Press contributed to this report.

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