This is exchanges at Goldman Sachs, where we discuss developments currently shaping markets, industries, and the global economy.

I'm Allison Nathan from Goldman Sachs research, creator and editor of the firm's top of my report,

which focuses on macroeconomic issues on the minds of our clients.

In this episode, we focus on concerns that the accelerating economic recovery from the COVID-19

recession,

the largest US fiscal stimulus outside of wartime

and the Fed's commitment under its new framework

to keep monetary policy very easy

until higher inflation is actually sustained are

setting up the US economy to substantially overheat. The likes of former

Treasury Secretary Larry Summers and former Chief IMF economist

Olivier Bonschard have recently voiced such concerns, arguing these conditions

could ignite inflationary pressures similar to the late 1960s and 70s or forced the Fed to tighten policy

much more quickly than it currently expects to, potentially strangling growth and jeopardizing

the still nascent recovery.

Partly in response to these concerns, US banyolds have jumped as inflation expectations have risen

and investors have begun to grapple with what the prospect of higher bond yields means for other assets.

Whether the current overheating worries are warranted and their implications for bond yields and markets more broadly is top of mind.

We first turn to Jan Hatzius, Goldman Sachs's head of global investment research and

chief economist, who pushes back on the view that U.S. fiscal support far exceeds what's needed to aid the recovery and will lead to substantial inflationary pressures.

Larry Summers and Olivier Blachard have articulated concerns that we are heading for a period of a sharp rise in inflation.

Do you share these concerns?

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