Will financial support from the government lead to inflation?

    Due to the coronavirus outbreak, many people have been negatively affected by the rising unemployment rate since many businesses were forced to shut down because of the stay at home orders. This left many people wondering: how am I going to afford my bills? The U.S. Senate and House of Representatives decided to help its population by releasing a $2 trillion stimulus package known as the CARES Act in late March (Blau, 2020). Despite the financial assistance, there are still citizens who are struggling to make ends meet, posing the question: will there be additional stimulus? As Libby Cantrill, Head of Public Policy at PIMCO, says, "additional stimulus is a question of when not if". She later explains that the 'when' is taking a longer than initially thought and suspects Congress will be discussing the matter when they reconvene in November (Keen, 2020). 

    With the thought of additional stimulus being issued into the economy, some companies and investors are worried about the inflation rate rising since massive amounts of money are being circulated into the economy (Amaro, 2020). On the other hand, other people believe that inflation isn't going to rise because, despite the excessive supply of money going into individual incomes, the demand to use that money is very low and therefore not entering the economy (Jones, 2020). 

Do you think either of these arguments is correct? Is it possible for both of them to be correct? Maybe the rise in the inflation rate will be a delayed effect until the economy stabilizes and the demand to spend money increases.

Links:

Amaro, Silvia. "Investors are dismissing the risk of an inflation spike. Morgan Stanley says that could be a mistake." CNBC, 4 Aug. 2020, www.cnbc.com/2020/08/04/new-stimulus-checks-could-push-up-inflation-morgan-stanley-says.html. Accessed 6 Sept. 2020.

Blau, Steven, et al. "Congress Passes Largest Ever Economic Stimulus Package: Key Provisions Of Cares Act - Update April 2020." JDSUPRA, 27 Mar. 2020, www.jdsupra.com/legalnews/congress-passes-largest-ever-economic-55140/. Accessed 6 Sept. 2020.

Jones, Kathy. "Stimulus = Inflation? Why It May Be Different This Time." Charles Schwab, 13 May 2020, www.schwab.com/resource-center/insights/content/stimulus-inflation-why-it-may-be-different-this-time. Accessed 6 Sept. 2020. 

Keen, Tom, host. "Surveillance: Inflation Outlook with George." The Bloomberg Surveillance, 26 Aug. 2020. Bloomberg, www.bloomberg.com/news/audio/2020-08-26/surveillance-inflation-outlook-with-george-podcast. Accessed 6 Sept. 2020.