Although this is very limited data, it does suggest that low rates can spark higher inflation, which is an explicit goal of the Fed's policy. Based on this, it does seem quite possible that inflation will increase, potentially faster than the Fed now expects.
A possibility isn't a certainty, though, particularly given the recent decline in inflation. Whether the Fed will be forced to raise rates quickly, then, depends on whether inflation is indeed heating up, and how far that might go. We’ll take a look at that next week.
Brad McMillan is the chief investment officer at Commonwealth Financial Network, the nation’s largest privately held independent broker/dealer-RIA. He is the primary spokesperson for Commonwealth’s investment divisions. This post originally appeared on The Independent Market Observer, a daily blog authored by McMillan.