Headline inflation just hit 5.4%, the highest rate since 2008.
Here are 4 charts on why it's premature to panic & 3 ideas for policymakers if they want to reduce inflation risk.
1. Market-based forecasts of medium-run inflation (5-10 years from today) remain anchored at 2.2%
Here are 4 charts on why it's premature to panic & 3 ideas for policymakers if they want to reduce inflation risk.
1. Market-based forecasts of medium-run inflation (5-10 years from today) remain anchored at 2.2%
2. Most of the inflation in June — 60% — is from cars.
As the global semiconductor shortage ebbs, we can expect inflation related to cars to return to its historical average.
(chart via @WhiteHouseCEA)
As the global semiconductor shortage ebbs, we can expect inflation related to cars to return to its historical average.
(chart via @WhiteHouseCEA)
3. If you want to know where inflation is heading, look at median CPI.
In contrast to headline CPI, median CPI remains stable at 2.2% year-over-year.
Headline CPI is more volatile than median CPI, but historically it has reverted *toward* median CPI after short deviations.
In contrast to headline CPI, median CPI remains stable at 2.2% year-over-year.
Headline CPI is more volatile than median CPI, but historically it has reverted *toward* median CPI after short deviations.
4. Lastly, year-over-year inflation numbers remain plagued by base effects, as the economy was depressed in June 2020.
Look at the 2-year core inflation number instead: 2.8%.
This is consistent with the Fed's average inflation targeting.
(chart via @jasonfurman)
Look at the 2-year core inflation number instead: 2.8%.
This is consistent with the Fed's average inflation targeting.
(chart via @jasonfurman)
But with each new data point, we should update are assessment of inflation risks.
Here are 3 good ideas that are worth doing on their own, but would have the added benefit of reducing inflation risk in the long run.
1. Roll back the Trump tariffs! They raise input costs.
Here are 3 good ideas that are worth doing on their own, but would have the added benefit of reducing inflation risk in the long run.
1. Roll back the Trump tariffs! They raise input costs.
2. Use competition policy!
The Biden administration needs to follow through on its executive order from last week to reduce costs in our least competitive markets, especially healthcare.
My previous thread:
The Biden administration needs to follow through on its executive order from last week to reduce costs in our least competitive markets, especially healthcare.
My previous thread:
https://twitter.com/AlecStapp/status/1413516987343458318
3. Pass the bipartisan infrastructure bill!
While it may seem odd to spend more money to tamp down inflation, infrastructure spending is a special kind of spending.
It’s an investment in the future productivity of our economy, which will help limit inflationary pressures.
While it may seem odd to spend more money to tamp down inflation, infrastructure spending is a special kind of spending.
It’s an investment in the future productivity of our economy, which will help limit inflationary pressures.
Folks, if you have a strong belief that inflation won’t be transitory, there’s a lot of money to be made in the bond market.
I wish you the best of luck.
I wish you the best of luck.
https://twitter.com/juliusprobst/status/1415022409166557187
Good short thread from @AlanMCole:
https://twitter.com/AlanMCole/status/1415267258151149569
Full post is up on the @ppi blog here: progressivepolicy.org/blogs/why-its-…
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