Inflation’s New Normal Will Be 4%. Get Used to It.
Many of the forces keeping prices in check have started to reverse, but bigger gains in consumer prices won’t be bad for the economy as long as they’re predictable.
Now that inflation is back, it's not going away anytime soon. The Federal Reserve expects it to fall below 3% next year and eventually go back to 2%. But there are reasons to think that’s far too optimistic. We are living in a new world. Even after things get back to normal that could mean inflation averages 4% or even 5% for the foreseeable future.
Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
This piece originally appeared in Bloomberg Opinion