by Summary:
Yesterday’s US inflation data from the Bureau of Labor Statistics (July 12, 2023) – Consumer Price Index Summary – June 2023 – shows a further significant drop in the inflation rate as some of the key supply-side drivers continue to abate. The annual inflation rate is now back to 3 per cent and dropping fast. The risk now is that the conduct of the Federal Reserve will drive the US into a deflationary period with rising unemployment. Given that inflation peaked in the third-quarter 2022, that wages growth has been relatively subdued, and inflationary expectations’ survey evidence suggests no-one really thinks the inflation was going to endure, means that the US Federal Reserve’s logic is deeply flawed and not fit for purpose. They have been chasing an obsession that exists in a parallel
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Yesterday’s US inflation data from the Bureau of Labor Statistics (July 12, 2023) – Consumer Price Index Summary – June 2023 – shows a further significant drop in the inflation rate as some of the key supply-side drivers continue to abate. The annual inflation rate is now back to 3 per cent and dropping fast. The risk now is that the conduct of the Federal Reserve will drive the US into a deflationary period with rising unemployment. Given that inflation peaked in the third-quarter 2022, that wages growth has been relatively subdued, and inflationary expectations’ survey evidence suggests no-one really thinks the inflation was going to endure, means that the US Federal Reserve’s logic is deeply flawed and not fit for purpose. They have been chasing an obsession that exists in a parallel
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Yesterday’s US inflation data from the Bureau of Labor Statistics (July 12, 2023) – Consumer Price Index Summary – June 2023 – shows a further significant drop in the inflation rate as some of the key supply-side drivers continue to abate. The annual inflation rate is now back to 3 per cent and dropping fast. The risk now is that the conduct of the Federal Reserve will drive the US into a deflationary period with rising unemployment. Given that inflation peaked in the third-quarter 2022, that wages growth has been relatively subdued, and inflationary expectations’ survey evidence suggests no-one really thinks the inflation was going to endure, means that the US Federal Reserve’s logic is deeply flawed and not fit for purpose. They have been chasing an obsession that exists in a parallel universe to the real world. The risk is that they will continue to chase that obsession and use the fact that unemployment has still not risen much to claim there has to be higher unemployment. However, hopefully, the 3 per cent inflation rate result yesterday will cut-off any wild claims that they have to get the inflation down more quickly or risk a wages or expectations explosion. All cant of course.
Unfortunately, it is difficult to establish causality when many causal factors are potentially involved and there are also different kinds of inflation, e.g., cost-push and demand-pull. So, the Phillips curve-NAIRU farce of central banks using assumptions of conventional economics continues and the Fed will take credit.
William Mitchell — Modern Monetary Theory
US inflation rate down to 3 per cent and falling fast – it was transitory, folks
Bill Mitchell, Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
US inflation rate down to 3 per cent and falling fast – it was transitory, folks
Bill Mitchell, Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia
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A system produces the result of its design. Under "capitalism" economic systems are designed for "growth" through capital accumulation. Such systems assume, for example, that "labor" is a market and "land" (natural resources) are unlimited and that "the solution to pollution is dilution." In the extreme, the assumption is that "there is no such thing as society" (Margaret Thatcher).