How BIG of a threat is inflation right now?

As I blogged about yesterday (HERE), the recent increase in mortgage rates has been prompted by an increase in inflation expectations.  If you’ve been reading the newspaper or listening to some of the financial commentators then you may be worried about the recent increase to commodity prices.  And if you monitor mortgage rates then you may be concerned because inflation is the primary driver of mortgage rates.

The Economist magazine have a couple good pieces about inflation in their current issue (see HERE and HERE).  Their view?  Inflation is certainly on the rise but mostly in the developing world where a greater percentage of income is spent on food and energy. In the developed world we are seeing price pressure but from very low levels and at this point it’s too early to sound any alarm on hyper-inflation.

This bodes well for interest rates.  I’ve been writing since last fall that rates would have to begin moving higher.  My hope is that they don’t get shocked higher but move gradually instead.

What do you think?  Do you believe we’re in for an acute rise in rates or will they increase gradually?  Leave your comments below.