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Inflation’s Real Threat to the Economy

Moving too fast?

Photographer: Bill Pugliano/Getty Images

With all the attention focused on the stock market drama last week, it’s understandable that new inflation data got lost in the shuffle. But let’s not forget that rising prices are what woke the bond market from its long slumber in the first place.

Long before the wage inflation revealed by the jobs data for January was a meaningful concern, producer prices had been on a relentless march upward, hitting a recent six-year high. On a slightly more granular level, rising input prices pushed up the Journal of Commerce Index of 18 industrial commodities to a recent three-year high.

The markets wasted no time pricing in what was to come. Perceived inflation risk, based on the market’s expectations for inflation over the next 10 years, rose along with the cost of raw materials. Markets got more evidence of inflation on Wednesday as data showed the consumer price index rose 0.5 percent in January, the most in five years.

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