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US Need Not Worry About Inflation, But Corporate Tax May Rise


Is President Biden planning to hike corporate taxes soon? Recent comments from US Treasury Secretary Janet Yellen at the congressional testimony alludes to Biden considering increasing the corporate tax to 28% and looking for ways to encourage businesses to move their operations back stateside.

After passing the $1.9 trillion COVID-19 relief package, Biden is expected to focus his next efforts towards infrastructure, helping the US generate more jobs and tackle climate change. However, his administration has faced considerable criticism about their high spending plans without any clarity on how they will offset the high debt incurred by the US.

Meanwhile, Fed Chairman Jerome Powell focused on inflation during his testimony, admitting that prices could rise in the coming months after remaining muted through the past year but the effects of the spike would not be large enough or last long enough to require any kind of action from the central bank. Inflation is expected to rise in response to sectors of the economy recovering from the pandemic driven slump, rising on the back of pent-up demand, possible bottlenecks in supply chains.

Powell’s comments sent the benchmark 10-year US Treasury yields lower for the second consecutive day. He added, “We have been living in a world of strong disinflationary pressures — around the world really — for a quarter of a century. We don’t think a one-time surge in spending leading to temporary price increases would disrupt that.”

 





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