James Hamilton says that some of the short term inflationary pressures the economy has been facing are subsiding.  At the same time, the prospect of deflation no longer seems as likely.  What does this mean?  I’m not really sure.  But perhaps without as much risk of runaway asset prices and without such strong deflationary pressure, the federal reserve can more easily generate moderate short term inflation to help lower the real interest rate and  boost employment.


1 comment so far

  1. juanseguin on

    Really inflation right now is nothing more than a tawdry excuse to criticize the current administration. Sure deficits are high, but the economy is far below full employment and no one sees that changing in the next year. I agree that a fair degree of modest short term inflation would do a lot of good about now.

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