Here’s why you need to watch the effects of Biden's stimulus plan

Smart Money: What happens to US inflation will provide vital clues for the world economy

Joe Biden’s $1.9 trillion stimulus plan is a vital support, or risks setting off inflation and eventually higher interest rates. Photograph: Getty

Joe Biden’s $1.9 trillion stimulus plan is a vital support, or risks setting off inflation and eventually higher interest rates. Photograph: Getty

In the midst of a pandemic it may seem a ridiculous question. But financial markets are starting to ask whether, as we emerge from the pandemic, inflation – and thus long-term interest rates – may pick up.

On Wednesday, the US Congress passed a massive $1.9 trillion (€1.6 trillion) stimulus plan to respond to the pandemic. Debate is raging on whether this is a vital support, or risks setting off inflation and eventually higher interest rates. On Wall Street, long-term interest rates on the bond market have risen sharply.

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