Why Were Inflation Hawks Wrong?

Former Treasury Secretary Larry Summers predicted inflation would be a problem in early 2021 .

He suggested mass unemployment would hold inflation in place but cut inflation by 2.5 points.

Julian Zelizer : The Fed 's preferred inflation measure is now down to about 2.6 percent .

Zelizer says there are two theories for why inflation decreased or increased in recent years .

David Rothkopf : Inflation was transitory, largely caused by supply chain snarls resulting from the pandemic and Russia ’s invasion of Ukraine that have since been sorted out.

He says it fits with the low unemployment of this period, which suggests we were high on the slope of the Phillips Curve , meaning that prices would fall rapidly in response to only a small change in demand.

But this is a peculiar idea that Fed “credibility” cannot be directly measured (just like NAIRU , by the way)..

David Autor , Arin Dube , and Annie McGrew : Nearly 40 percent of the post-1980 increase in income inequality has been reversed.

It's now an open question whether we will continue on the trail blazed by Biden ’s half-improvised economic program, they say.