Friday, February 11, 2011

Inflation Expectations Climb

According to Friday’s consumer sentiment survey released by Reuters/University of Michigan, inflation expectations are climbing.

Back in September, U.S. consumers expected the inflation rate one year out to hit 2.2%. In early-February, the one-year expected inflation rate is up to 3.4%.

This is one of the reasons the desire to hold cash balances appears to be declining. The higher inflation expectations climb, the more people will prefer to spend cash rather than hold it. 

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