Economic stimulus-debt paradox; inflation to weaken with demand?

By Blu Putnam, Chief Economist & Erik Norland, Senior Economist, CME Group

The Economic Stimulus/Relief-Debt Paradox

• Budget deficits are rising globally amid surge in sovereign debt issuance.
• Countries spending trillions to mitigate economic impact of pandemic.
• Long-term interest rates have remained low despite ballooning debt.
• Are rising debt loads a sign central banks will keep policy rates low?

Consumer Prices Set to Fall, Mute Inflation?

• Demand for most non-staple goods, services has plummeted.
• Economy could be heading for a transitional but intense drop in prices.
• Inflation might be muted even as consumer spending makes a comeback.
• Could deficit spending, expanded central bank balance sheet stoke inflation?