KEY POINTS
- In a major policy shift, Powell said Thursday the central bank plans to let inflation run hotter than normal in order to support the ailing labor market and support the broader economy.
- In every decade since the 1980′s, an uptick in inflation causes an acceleration of profits, according to data from Fidelity Investments.
- “An environment in which prices are rising and inflation is rising, makes for an environment in which its easier to pass on higher input costs,” Gregory Daco, chief U.S. economist at Oxford Economics, told CNBC. “They have higher pricing power and the company has an easier time to raise pricing and the first effect will be to raise revenue.”
Federal Reserve chair Jerome Powell just announced the central bank’s policy shift on letting inflation tick higher amid a coronavirus pandemic that has dragged the U.S. economy into a recession.
While inflation can be scary to investors, history shows that company profits increase when inflation is rising. In every decade since the 1980′s, an uptick in inflation causes an acceleration of profits, according to data from Fidelity Investments.
Source: cnbc
