Consumer-price inflation in America jumps up to 4.2%

AS AMERICA’S ECONOMY bounces back from the pandemic, aided by trillions of dollars of fiscal stimulus, the main question on investors’ minds is if and when inflation will take off. The Federal Reserve has vowed to tolerate a period of above-target price rises so that the economy can get back on its feet; Jerome Powell, its chairman, has said it is “not even thinking about thinking” about raising interest rates. Yet with many asset prices underpinned by rock-bottom rates, investors have been jumpy, fretting that high inflation could force the central bank’s hand.

Then came a big inflation surprise. Figures published on May 12th showed that America’s consumer-price index rose by 4.2% year-on-year in April, a rate not seen since 2008, and considerably higher than the 3.6% that had been expected by forecasters. The S&P 500, America’s main stockmarket index, fell by 2% that day.