KBRA Releases Research ? U.S. Inflation: How Much of a Threat?

Kroll Bond Rating Agency (KBRA) releases research that discusses recent inflation prints, market expectations, comparisons with peer countries, and the source of labor market cost-push dynamics for the U.S. The U.S. Federal Reserve's new flexible average inflation targeting (FAIT) strategy, which takes a more liberal approach to the 2% target, creates uncertainties about the precise path forward for monetary policy even in the face of inflationary pressures. The report also builds on previous KBRA research on pre-pandemic deflationary dynamics and our ongoing commentary on the U.S. employment situation.

Key Takeaways

• Monthly core inflation is decelerating but remains above expectations
• Expectations are that the Fed will tolerate above-target inflation over the medium term
• U.S. core inflation exceeds that of peers by a wide margin
• Short-term job market pressures contrast with expectations for the long term
• Credit should prove to be relatively durable in the face of rising inflation expectations

Click here to view the report.

Related Publications

• Tight is Not Strong: Perspectives on a Still Murky Jobs Market
• Inflation: Watch the Headlights or the Rearview Mirror?
• Many Moving Pieces: COVID-19's Impact on U.S. Jobs

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA's ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.