The contraction in credit reduced the money supply almost as much as the Fed quantitative easing increased it.
If the economy recovers and credit returns then there is potential for inflation. But the FED can sale the bonds it bought on the open market reducing the money supply and keeping inflation largely in check.
Combine that with the fact that the government is probably understating inflation by a couple of percent to avoid having to pay seniors increased social security benefits.
The reason we are seeing fuel costs go up is at least two-fold. First, as all crude is purchased in USD, and its value has declined in real terms. Crude is negatively correlated to the dollar, thus the price of crude has gone up. Secondly, Asian consumption of crude has also gone up considerably over the last 2 decades.
Food costs are highly correlated to oil costs. Crude is used in the production of fertilizers, the powering of farm vehicles, the transport of food, and its display and sale. Thus higher fuel costs generally equals higher food costs.
Finally, with loss in GDP during 2008-2009, an opinion is that QE has replaced less than 75% of the loss, and that is partly why we haven’t seen inflation. Combined with a largely stagnant US economy and slow global consumption, inflation is low. However, it won’t likely stay that way, in my opinion.
if they can find buyers on the open market for the rate the it’s possible, but what happens when the buyers demand a better return? Does the fed take a hit and increase the interest rate? Or do the bonds not sale - then what does the fed do?