One of the better summaries of inflation and the different schools of thought I’ve read, so thank you. I disagree with the comments on transitory though, and I don’t think you can say summers is wrong in his use of this word. I feel like transitory is getting a dose of revisionist history. Transitory inflation in 2021 was the notion that inflation would self moderate without the need for a policy response. After QT and a 500 bps give or take policy response, a significant decline in inflation can’t be transitory using the 2021 swing iron, given it’s clearly somewhat impacted by the policy response. The counter factual of what inflation would be today if fed was still on hold is unknowable, but is comfortable wager it wouldn’t be trending down like it is now, it would be flat or moving higher.
Thanks for the comment Alex. I guess opinions can differ on the precise meaning of transitory, but I think Summers himself (and most others who thought like him) was pretty clear in arguing that getting inflation down would require not just a change in the monetary policy stance but an actual softening of the labor market. In fact, I think his prediction at the time was that in the absence of any meaningful labor market softening, inflation would likely *accelerate*. But as things turned out, there was no softening and inflation, rather than accelerating, has decelerated.
yup np
One of the better summaries of inflation and the different schools of thought I’ve read, so thank you. I disagree with the comments on transitory though, and I don’t think you can say summers is wrong in his use of this word. I feel like transitory is getting a dose of revisionist history. Transitory inflation in 2021 was the notion that inflation would self moderate without the need for a policy response. After QT and a 500 bps give or take policy response, a significant decline in inflation can’t be transitory using the 2021 swing iron, given it’s clearly somewhat impacted by the policy response. The counter factual of what inflation would be today if fed was still on hold is unknowable, but is comfortable wager it wouldn’t be trending down like it is now, it would be flat or moving higher.
Thank you!
Thanks for the comment Alex. I guess opinions can differ on the precise meaning of transitory, but I think Summers himself (and most others who thought like him) was pretty clear in arguing that getting inflation down would require not just a change in the monetary policy stance but an actual softening of the labor market. In fact, I think his prediction at the time was that in the absence of any meaningful labor market softening, inflation would likely *accelerate*. But as things turned out, there was no softening and inflation, rather than accelerating, has decelerated.
That’s a v good point on the labour market dynamic. That part I agree isn’t consistent