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Western Asset Portfolio Manager Bonnie Wongtrakool joins Yahoo Finance Live to discuss how markets are reacting to Fed Chair Powell’s testimony before Congress, uncertainty over future Fed policy, investor sentiment, and the outlook for the economy.
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As the economy continues to recover from the impacts of the pandemic, a strategist has noted that current rate levels are projecting robust growth in inflation.

The U.S Federal Reserve has kept interest rates low in an effort to boost economic activity, but some experts believe that this policy could come with some negative consequences, including rising inflation.

According to David Kostin of Goldman Sachs, current rate levels suggest that inflation is set to increase in the coming months. “The current levels for rates-based inflation expectations are projecting very robust growth in inflation,” he said.

Kostin believes that with the strong economic outlook and aggressive fiscal stimulus, inflation risks are increasing. He noted that higher inflation could lead to higher interest rates, which could pose a risk to the economy’s recovery.

The strategist’s warning comes as the U.S economy continues to show signs of strength. The job market has been strong lately, with the unemployment rate dropping to 4.9% in February, down significantly from the 14.8% rate seen last April.

As businesses reopen and people return to work, consumer spending is expected to increase, which could further drive up inflation. The Federal Reserve has stated that it is monitoring inflation closely and will do what it can to keep it under control.

At the same time, some experts have pointed out that inflation has been low for years, and the economy could benefit from a moderate increase. The Federal Reserve’s target for inflation is 2%, but it has consistently fallen below that level in recent years.

While the economy’s recovery is undoubtedly a positive development, the potential for rising inflation is a concern. Kostin’s warning serves as a reminder that policymakers need to be mindful of this risk and take steps to prevent its negative consequences.

In conclusion, the current rate levels suggest that the U.S economy is set for robust growth in inflation, according to strategist David Kostin. While the economy’s recovery is undoubtedly positive, policymakers need to monitor inflation closely to prevent potential negative impacts on the economy’s recovery.