Low Inflation Continues to Disappoint Inflation Hawks


Perhaps you’ve read that inflation is up recently. Last night, for example, NBC News breathlessly told me that the price of eggs had gone up 13 cents over the past year. Does this mean that the inflation worries we’ve been hearing about continuously for the past four years are finally coming true?

I’d be happy if they were, since I think higher inflation would do the economy some good. Sadly, though, inflation remains well anchored. Despite the higher numbers of the past two months, the Fed’s latest projections have increased by….one tenth of a percentage point. Or, if you take the average of their range, by one twentieth of a percentage point, from 1.55 percent to 1.6 percent.

And how about 2015? They’re projecting 1.75 percent. And 2016? A whopping 1.8 percent. In other words, they believe that we’ll continue to undershoot our inflation target for at least the next three years.

At the same time, their projection of GDP growth has plummeted from 2.9 percent to 2.2 percent. And their projections for 2015 and 2016 continue to hover around an anemic 3 percent.

So: we have low growth, low price inflation, low wage inflation, and unemployment is still high. This is really not an environment in which spending cuts and lower deficits are the answer. More here from Mark Thoma.

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Corrupt leaders the world over can (and will) try to shut down the truth, but when the truth has millions of people on its side, you can't keep it down for good. And there's no more powerful or urgent argument for your support of Mother Jones' journalism right now than that. We need to raise about $450,000 to hit our online fundraising budget in these next few months, so please read more from Monika and pitch in if you can.

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