Question

Discuss why many economist forecast inflation to pick up in the US in the coming quarters

Answer 1

Economist's Expectations of Inflation to pick up in coming quarter:.

The trend of inflation in US has always been significant for the economist to study so as to predict the future trend in order to take necessary measures to keep it healthy for the economy and to prevent complexities in taking domination in case it is unhealthy through incorporating various policies . Thus economists aim to measure the inflation in various ways one being the producer price index.

As the US financial markets have witnessed some price rise which both the investors as well as the economy had not expected due to the prevailing conditions which gives a notion to the investors that the US economy might soon reckon with the rising inflation.

The economists however are expecting the inflation to be healthy for the economy as per the recent report presented on march which is based on the analyses and evaluation of market trends done in Feb 2019.
While inflation seems to decrease the purchasing power of the economy to some extend but is still expected to strengthen the economy in terms of trade and business activities. The decrease in the purchasing power is expected to be offset with the rise in the wages of employees as per the study made.

The govt of US has also recently published certain measures to inflation, it is although done every year either monthly or quarterly. These recent measures have been published to make the businesses, firms , financial institutions and banks aware about the expected rising inflation, so as to ensure that they remain wary and if the prediction of economists proved true , necessary measures are implemented and support by these corporations is expected to curb the situation.

The main measures are :
CPI (consumer price index)
PCE ( personal consumption expenditure)
Both of them are conducted separate from each other and are based on the different factors but they reflect the same thing i.e inflation rate.

The main reasons for inflation to rise are the market condition of US which are witnessing increase in the prices of commodities due to incorporation of differential strategies in the highly competitive market and the premium pricing strategies which is almost followed by maximum firms. This has caused a price war between the competitive firms to exist
The CPI depicted as an effective measure has reflected the chabges taken place in the price paid for the goods and services .
Another evaluation measure , the BLS i.e (bureau of labor statistics ) has showed the spending patterns of customers and wage earners which has witnessed a considerable decline due to rise in prices of commodities

Now the monthly employment report that was supplied by the worried govt of US n Feb 2 has showed that the economy has just started to move towards the inflation considering it as a sign that economy is close to attaining full employment, another important characteristic of rise in inflation.

It is also concluded by the economists that if the economy is going to run as same on the horizon then the inflation should be expected to rise further in the next quarter.

The recent tax overhaul initiated by the Donald trump has maybe believed to worsen the situation , as the tax hike has said to slash the rate of corporate income tax and has also resulted in considerable decline in the personal income tax rate thus causing the US economy to even overheat due to full employment

The market condition has been reported to witness the pricing percentage of about 86 % in the coming quarter point

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