Last week's jobs report was the strongest since the summer, with more than 500,000 new jobs added and the unemployment rate falling to 4.6%. The combination of this positive economic news, solid corporate earnings and the passing of the infrastructure bill has pushed stocks to new highs while bond yields remain contained.
This week, the markets will receive multiple pieces of economic data regarding inflation. The flip side of the recovering economy as the pandemic runs its course is the persistent supply chain problems that are pushing prices higher in many areas.
Consumer inflation is set to reach its highest level since the early 1990s, with little relief in sight. The expectation for the Consumer Price Index is an increase of 5.9% year-over-year while the Producer Price Index is set to rise by 8.6% since last year. This increase in inflation is becoming an issue for both monetary and fiscal policymakers. How long inflation runs at these elevated levels will be very important for the next move in markets, as well as the timing for the Federal Reserve to remove policy accommodation.
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