Expectations for gains in consumer prices are moderating, but there is a lot of anxiety among households.
The latest inflation report, showing that price increases slowed in October, suggests that the US just might get the “immaculate disinflation” that everyone is hoping for: Inflation will fall to its pre-pandemic levels and remain there, and the US will avoid a recession. Allow me to make the pessimist’s case that we are not out of the woods yet.
I acknowledge that the sunnier view has a lot going for it. Optimism comes not only from the decline in actual inflation, but also from the decline in expectations of future inflation. Take a closer look, however, and it’s clear that some measures of expectations have not improved that much even as inflation has fallen. That means the situation is unstable and inflation could go back up again.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
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