The Capital Group Inc . Singapore - Three Facts Investors Need to Know
Inflation
Is Back . Three Facts Investors Need to Know
Its official : inflation is back in the US . The consumer price index hit 2.1 % at the end of 2016 — the highest level since June 2014 . For investors , an upturn in inflation can be a big deal . With that in mind , here are three facts investors need to know .
1 . The Scene Is Set for Higher Inflation .
The recent inflation figure may have grabbed the headlines , but evidence suggesting higher inflation is coming has been around for a while . Longer term U . S . Treasury yields are often a good barometer , and they first started to move up in mid-2016 .
Factors lifting inflation include prospects for greater government spending under the new administration , higher housing prices and increased fuel costs . Oil prices have recently been above US $ 50 a barrel , about double the level of around a year ago when they hit a 13-year low of US $ 26 .
Wages are another important factor to keep an eye on . Given that the unemployment rate ( 4.7 % in December 2016 ) is close to the Federal Reserve ’ s estimate of full employment , pay increases could become a key source of inflationary pressure .