"IF WE HAD NO WINTER...THE SPRING WOULD NOT BE SO PLEASANT."

17th-Century poet Anne Bradstreet's words ring true not only for the seasons, but also for last week's Retail Sales numbers. Just days before Sunday's "spring forward" into Daylight Savings Time, the retail sector looked to be unfreezing and showing at least a little spring in its step.
As you can see in the chart below, Retail Sales for February were reported last Friday at 0.3%, which was better than the previous month's reading and much better than the -0.2% expected. Despite the good news, however, we need to keep in mind that it will be subject to future revisions - just like we saw in Friday's report, in which last month's decent 0.5% reading was revised sharply lower to just 0.1%. 
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Chart: Retail Sales (Month-Over-Month)

The better-than-expected Retail Sales was good news for the economy, but it could also lead to inflation trouble ahead. Remember, inflation is the archenemy of Bonds. Just last week, fears of inflation in China pressured Bonds around the globe. And here in the US, a number of Fed members have already mentioned inflation as an increasing concern.
And it isn't just Fed officials who have been warning against inflation; investors around the globe are having increased doubts. Massive debt and massive balance sheet expansion - combined with near zero interest rates for a long period of time - will no doubt conjure a recipe for inflation. 
The question is this: Once inflation rears its ugly head...will the Fed have the courage and the will to kill the monster by tightening policy, amidst enormous political pressure not to do so?  The next Fed meeting is taking place this week, and the Policy Statement released on Tuesday will garner intense scrutiny.