After years of hibernation, the in-flation bears are starting to growl. A surprise 0.5% jump in consumer prices in April―the largest in nearly a year―drove the annual-ized inflation rate over the last three months above 4%. Couple that with the Federal Reserve's lax monetary policy, and the inflation-phobes argue that the U. S. economy may be in for a debilitating spike in prices, "Long-run inflation risks are rising," says Banc of America Securities Chief Economist Mickey D, Levy. His prescription; an aggressive regime of interest-rate hikes by the Fed. Levy and his fellow bears should relax. Sure, inflation can pose dangers for the economy. Look at the 1970s. But after a year of inflation at rock-bottom levels, the return of a bit of pricing power is nothing to dread. Indeed, it may be just what's needed to ensure that the expansion has staying power.
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