Bond players are working hard to create a narrative environment that the elevated inflation requires immediate actions from the central banks to tighten monetary policies. Their views and behaviours are biased, if not selfish and foolish.
For the third quarter, the GDP in the US actually only grew at annualized pace of 2%, despite low growth last year bumped the growth calculation, and many government stimulus in place. The economy restart to normal operation will take time as the system is just too big to synchronize with each other to balance supply and demand relationship. Think about how long it needs to restart your computer! We are talking about the supply chains at global scale.
Second, inflation, though it is elevated but not due to economy overheating. They are mostly due to supply chain constraints and high energy prices. For example, in Canada, current inflation is 4.5%. According to the governor of the Bank of Canada, more than 2% out of that is accountable by supply constraints from oversea. And more than 1% of that is caused by high energy prices. Both factors are out side the control by monetary policies.
Due to pandemic, a lot of economic activities that normally outside the calculation of GDP, are now part of GDP framework. For example, cash spending in some restaurants are moved to McDonald, and payment in cash becomes not a preferable and therefore they inevitably turn into GDP calculation. So the GDP numbers now include elements that were excluded in the past.
In summary, my point is that we need the central banks to be patient in changing monetary policies.