Did you see Scott Galloway did a new TED Talk? I stopped watching them when they became too woke and partisan, but WOW, this really puts TED back on the map!
I think part of the inflation debate issue is the measure. The measures contain the slow moving and lagged Owner's Equivalent Rent - both in CPI and PCE. If we were to use to European measure of inflation, we're already at 2%. Dealing with that question is paramount to determining the next actions by the Federal Reserve.
Oh, the Fed won't do that (personally I think a risky decision). Given inflation is at 2%, we can keep rates as is though. The danger is if we end up with unnecessary unemployment due to the lagged impact of interest rate decisions. I also don't think they should be much lower than now - maybe at 3.5/4%.
Regarding perceptions, I think long run expected inflation recently declined again to 2.6% from 2.7% which is similar to historic perceptions.
You can have multiple equilibria with certain outcome variables being at the same level. Monetary policy, fiscal policy and technology can interact to reach the same level of inflation. Moreover, the Fed has other tools - as it did today by reducing the quantitative tightening, effectively a minor interest rate cut - it can do other things to influence the inflation rate.
Separately, although research still is not definite on this subject, I think the evidence points to that very low interest rates (0% and the like) have long run adverse economic consequences. This is mainly because it permits 'bad' companies (often called zombie companies) exist. These zombie companies usually have low productivity, but due to their sheer size, they can use debt to protect their existence and make it harder for new, productive entrants to come in.
Did you see Scott Galloway did a new TED Talk? I stopped watching them when they became too woke and partisan, but WOW, this really puts TED back on the map!
Just did. He proposes things that could help bring back SC culture.
I think part of the inflation debate issue is the measure. The measures contain the slow moving and lagged Owner's Equivalent Rent - both in CPI and PCE. If we were to use to European measure of inflation, we're already at 2%. Dealing with that question is paramount to determining the next actions by the Federal Reserve.
If so, then I would expect the Fed to be cutting rates today, and public perceptions of inflation to diminish in the coming months. We will see.
Oh, the Fed won't do that (personally I think a risky decision). Given inflation is at 2%, we can keep rates as is though. The danger is if we end up with unnecessary unemployment due to the lagged impact of interest rate decisions. I also don't think they should be much lower than now - maybe at 3.5/4%.
Regarding perceptions, I think long run expected inflation recently declined again to 2.6% from 2.7% which is similar to historic perceptions.
Now wait a minute. If inflation is back to where it was before the pandemic, why can't rates go back down to where they were then?
You can have multiple equilibria with certain outcome variables being at the same level. Monetary policy, fiscal policy and technology can interact to reach the same level of inflation. Moreover, the Fed has other tools - as it did today by reducing the quantitative tightening, effectively a minor interest rate cut - it can do other things to influence the inflation rate.
Separately, although research still is not definite on this subject, I think the evidence points to that very low interest rates (0% and the like) have long run adverse economic consequences. This is mainly because it permits 'bad' companies (often called zombie companies) exist. These zombie companies usually have low productivity, but due to their sheer size, they can use debt to protect their existence and make it harder for new, productive entrants to come in.