Yesterday Treasury Secretary Janet Yellen said that the higher annual inflation readings may well last into year-end, however, ultimately should be temporary with both the Treasury and White House officials watching inflationary trends very closely. In her testimony before Congress, Yellen said she expects inflation to last ‘for several more months, and to see high annual rates of inflation through the end of this year’. Yellen believed the data will remain ‘bumpy’ with supply chain bottlenecks, the shortage of semiconductors, and extraordinary used car price rises. However, she still deems there remains a lot of ‘slack’ in the economy with millions of job openings. ‘I don't believe that will be inflationary, but we're watching that carefully and have tools to address it’ she said to a question on whether Biden's USD1.9 trillion relief package that passed the Congress earlier this year will overheat the economy.\
We also heard from Gertjan Vlieghe, a BoE policymaker, saying that the UK central bank could raise rates as earlier than anticipated if the labour market bounces back faster than forecast. Vlieghe agrees with the bank's view of 7.25% growth for this year, though he was more cautious on employment, especially after the furlough scheme comes to an end in September. ‘In that scenario, the first rise in Bank Rate is likely to become appropriate only well into next year, with some modest further tightening thereafter’ he said. However, he said that if the labour market does pick up faster than expected, the BoE will need to move quicker. ‘It would probably take until the first quarter of next year to have a clear view of the post-furlough unemployment and wage dynamics, so a rise in Bank Rate could be appropriate soon after’ he said.\
Lastly, we have written before about things that go bump in the night, so you have to feel for Australia battling the huge plague of mice rampaging through south-eastern parts of the country. Australia for decades have suffered from periodic mouse plagues that typically affect grain-producing farm regions and tend to go in cycles. However, when you read that farmers have reported having to put the legs of their beds in buckets of water to stop the mice climbing up and biting them in their sleep you know it's bad.