Could Inflation Make a Comeback?

It seems that we are starting to put the inflation of the height of the last two years behind. Or are we?

There is no doubt, there are many indications that inflation is in return. A row slowed the consumer price growth for the sixth month, which increased by 6.5% in the last 12 months – a huge improvement in 9.1% annual growth in June, the Bureau of Labor Statistics said on Thursday. But can a second wave of inflation come back to us when we think we are safe? This has happened earlier, and a piece of economic data this week suggested that this is possible – although it is not possible – that it can happen again.

Given the historical record, a second wave of inflation can be particularly troubled for consumers and economy. Last time when the US experienced highly high inflation, in the early 1980s in the 1980s, the price growth came into three waves – twice, which was visible again before the end it back.

If we tolerate a second wave of inflation, an initial signal may come from the brain of the common people. Many economists believe that inflation is a large extent psychological phenomenon: If consumers believe prices are going to rise, they will behave in ways that make faith a self-developing prediction. For example, they can demand higher wages from their employers to expect they expect inflation, causing businesses to increase prices.

This is one of the reasons that the Federal Reserve Bank of New York Consumer Consumer Recovers tracks the expectations of inflation in the monthly survey of expectations. The December survey data showed that high consumers expect inflation over the long term: Consumers asked to estimate what would be the rate of inflation in five years compared to an average of 2.42% in December if asked the same question in November.

The growth of Hycm Capital Markets, the main market analyst, was enough to increase the giles Koghalan to increase a eyebrow.

Colaliation wondered whether the long -term expectations could be “three, four years to establish a large, hard inflation wave.”

“I will carefully monitor the hopes of long -term inflation,” said Cagglan.

Fed officials have also feared a “wage-price spiral” that leads to rising prices, leading to rising prices in out-of-control feedback loops. While the increase in wages has recently slowed down, the Monday’s survey provided a reason to be careful: the houses predicted an increase in income from 4.6% year-on-year, the highest on the record in the data returned in 2013, the houses predicted an increase in income.

This may be an indication that inflation, while cooling, can be approximately 4.6% rather than 2%, which is shooting for the Fed, Cogglan estimates.

However, data does not necessarily provide a clear signal. Josh Bivence, director of Research at the Economic Policy Institute, a progressive think tank, said in an email that the expectations of income are “a real puzzle” in light of the fact that the same survey showed expectations for wages, which are not increasing for most income, but about 3% hovering for more than a year.

Inflation rebound will be a longshot

To ensure that the expectations of inflation have not yet increased to the point where we should worry too much about it, Ryan Sweet, said the chief American economist of Oxford Economics.

“Currently, the expectations of inflation are well anchored,” Sweet said in an email.

There are other reasons to believe in inflation, once it decreases, it will remain down, Sweet said. For one thing, the economy is very different compared to the 1970s and 1980s, and therefore fed.

“The population was very young then,” he said. “There is a high marginal trend to consume a young population, which pulls more inflation. Today’s population is quite old. In addition, Fed, Fed, did not appreciate or understand the importance of inflation in the early 70s and led a wage-value spiral.”

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