Inflation rates have been a little stuck lately. Is that a bad thing?
Inflation rates have been a little stuck lately. Is that a bad thing?
Sometimes, the news of the day — or, at least, the business news of the day – doesn’t really feel like news. Like this morning, the Consumer Price Index for September put inflation at 3.7%. That’s where it was in August. And earlier this week, the New York Fed’s Survey of Consumer Expectations said Americans’ view of inflation is elevated, but stable, too.
So if the news is that there’s no news… is that good news? We asked a few economists.
“Uhh, I’ll take it,” said economist Mark Zandi at Moody’s Analytics.
“It would be better if we got news inflation were falling,” said Carola Binder at Haverford College.
“But we’re still progressing,” said Sean Snaith, a business professor at University of Central Florida.
Zandi said inflation has more or less been stagnant for most of 2023, but this is part of the journey and we just need to sit tight and be patient.
“People think the pandemic is in the rearview mirror and it is, but the fallout still continues,” he said.
We’re still waiting for the dust to completely settle when it comes to consumer spending and work habits. And we’re waiting for all the action from the Federal Reserve to settle, too.
“It’s kind of a popular expression about monetary policy, that it has long and variable lag,” said Binder.
Long and variable lag is basically economist speak for “boosting interest rates is a bit of an experiment that will take a while to get the results.”
“So that’s partly why things are so uncertain right now,” Binder said. “We’re kind of waiting and seeing what is it going to do to inflation and what is it going to do to the labor market.”
The worry, though, is that as the path to the Fed’s inflation target of 2% stretches, consumers will get used to prices going up. It’s why Snaith at UCF said stubborn inflation can hurt the progress the Fed has already made.
“You got to get the job done because expectations are really a powerful thing,” he said. “And, you know, if this path to two stretches out for several years it may be difficult ultimately to get there.”
It’s kind of hard to feel like we’re getting anywhere with inflation. Like we’re on a hamster wheel, sprinting in place. But Snaith said for now, that’s ok.
“The hamster’s still working I guess,” he said. “And who is the hamster? Is it Powell? Is it the consumer? Is it all of us?”
Maybe a tad existential. But the point is, we have to run in place for a bit to figure things out.
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