Inflation May Be On Biden’s Plate Sooner Than He Thinks

Now it could become just as bad.

During the pandemic, troubled municipalities and corporations with already low credit ratings feasted on cheap debt to keep going.

If the Fed pulls back its stimulative policies as the economy accelerates later this year, poorly managed cities may find no takers for their bonds at any interest rates they can afford. And investors may conclude that Ford’s F-150 or the Chrysler Ram franchise should be sold and one of their parent companies dismembered—akin to Craftsmen tools and Sears.

The Fed has indicated that it will tolerate inflation above 2% to push unemployment down to an acceptable level, but political pressures may mount on Biden to curb inflation, and Powell’s term is up in February 2022.

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