In news that was a surprise only to economists, but not average Americans, the Bureau of Labor Statistics reported earlier this week that the Consumer Price Index is now rising at the highest rate since 2022, and that it is increasing more rapidly than wages. The Federal Reserve, and financial markets, are reacting like a bucket of ice water had just been poured over their heads. Why are they surprised?
The May 16 London Financial Times fretted that “fears of a lasting inflationary shock from the Iran war sent global government borrowing costs soaring on Friday, with the 30-year US Treasury yield ending the week at its highest closing level since 2007.”
