If you're looking for signs of inflation you don't have to go any further than the lumber aisle at Home Depot.
Lumber futures have increased an astounding 375 percent between April 2020 and April 2021. That means investors have sunk almost four times as much money into the same amount of wood compared to a year ago, and the spike shows no signs of stopping. The increase has added $24,000 to the construction price of an average house.
There are a lot of reasons for the spike -- from harvesting restrictions in Canada to supply chain disruptions caused by the pandemic -- but we are seeing it across the whole commodity sector. The global economy went from a full stop a year ago to a reawakening at a much faster pace than many anticipated. Demand has simply overwhelmed supply.
This is what the Federal Reserve is looking at when they say they're comfortable keeping interest rates low. They believe that the current jump in inflation is transitory and that it will revert back to their targeted two percent range on its own as normalization continues. If it persists too long, it could force them to change their easy money policy. One of the stated mandates of the Fed is price stability.