Given the reaction of The Federal Reserve to the Covid-19 virus, it is understandable for investors to freak-out about possible Weimar Republic / Venezuela-like hyperinflation.
(Bloomberg) — Even a calamity of disease, death and economic destruction afflicting the world all at once isn’t enough to suppress the notion in some quarters that inflation could return with a vengeance.
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The coronavirus crisis has killed hundreds of thousands, incapacitated millions and affected the livelihoods of billions — prompting policy makers to fear a deflation spiral reminiscent of the Great Depression. But economists including former Bank of England official Charles Goodhart, and investors such as BNP Paribas Asset Management, are asking if a different phenomenon lurks in the wreckage of global growth.
Muted Price Growth
IMF predictions for inflation rate at end of 2021
Yes, inflation rates are muted in the short-run, but the surge in government spending and The Fed balance sheet is scaring some people about “inevitable” hyperinflation.
And the surge in M2 Money Supply YoY is leading some to panic.
But like the Titanic that sank after striking an iceberg in calm seas, there are calm seas on the inflation front. The EUR Inflation Swap Forward 5Y5Y is less than 1%.
The USD Inflation Swap Forward 5Y5Y rate is 1.7944%.
But USD Swaption volatility remains calm after a jolt upwards in March.
And the US Treasury Inflation Indexed curve is negative beyond 3 years.
So, the data is showing calm inflation seas, but gut-wrenching Venezuelan-like inflation.