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Markets Ignoring Main Driver of Inflation?

The Covid-19 pandemic has provoked the fastest and most unpredictable economic cycle and situations in modern times.A year ago, financial markets were in a state of terror, whereas today, there is a concern over extreme conjectures. Fears of economic depression in 2020 have given another panic and anxiety about hyper-Inflation that could be evident in 2021.

Such an unexpected macro-economic roller-coaster disobeys the historical comparisons of the economy.If the main driver of Inflation has too little industrial ability to meet consumer demands over the longer terms, then the procedure prescription would be to end the stimulus measures and allow the market interest rates to increase.

If, on the other hand, the main driver of Inflation is temporary supply shortages and improving sentiments about the global demand, then the current and ongoing stage of Inflation is a natural part of Covid and economy healing.The subsequent supply issues are now coming to the front as economies are slowly reopening. The development of the nation and vaccinations, accompanied by the sugar rush of economic aid, the savings gathered by lockdown and equity and house price gains, gives free rein to constrain consumer demand.

Spending money on goods such as furniture and automobiles has increased to above the pre-crisis levels. Meanwhile, factories are stressed to catch up with this quick reflection in demand. The consequence of this economic dip is a short-term flow in prices across the sectors for today, from semiconducting materials to metals and then to agricultural merchandise.

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