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Mind on Money: Proper response to inflation is crucial | F. Marc Ruiz: Your Mind on Money

The expectation of “transitory” inflation itself proved, unfortunately, transitory. Over the past two weeks we’ve learned the Federal Reserve indicated it is no longer using this expectation in its economic planning and policy going forward.

While the results of this expectation shift may have some challenging implications for investors, in the grand scheme this sea change is likely a good thing.

The COVID-19 crisis has been nothing short of devastating to many lives, from the illness itself, the loss of loved ones, the emotional tolls of isolation, and in no small way the social upheaval and division it has exasperated among Americans.

Through aggressive policy action from both the federal government and the Federal Reserve, the United States does appear to have economically weathered the COVID storm. Stock markets remain near all-time highs, economic growth is recovering quickly, and unemployment remains near historical lows.

While we are not without our challenges, such as supply chain disruption and decelerating job growth, our economy appears resilient currently.

What was the price of this resiliency? Money, lots and lots of money. The federal government has flooded the economy with a series of huge relief packages valued at $4.5 trillion (source: usaspending.gov) and the Federal Reserve has expanded the money supply by $5.5 trillion since the start of the crisis in early 2020 (source: Wall Street Journal).


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