ECONOMIC EXPERTS: “LITTLE BASIS FOR CONCERN ABOUT LASTING INFLATION”

Despite inflation hawks’ fearmongering in response to the latest consumer price index (CPI) report, economic experts have made it clear that there is little concern over lasting inflation or economic overheating, and that, should it occur, the Federal Reserve is more than equipped to handle it.

Skanda Amarnath, Director of Research & Analysis at Employ America:

  • “[The CPI report] showed that vaccinations are driving reopening and normalization in key sectors affected by the pandemic, including air travel and lodging. For those sectors facing bottlenecks, such as automobiles and technological hardware, prices are temporarily adjusting to reflect these constraints, but the ultimate resolution to these challenges will require more investment. Congress should move swiftly to support efforts that improve supply chain resilience and productive capacity.

    The Federal Reserve has made it clear that it will look through these transitory dynamics that were already expected to put upward pressure on inflation readings. We are still very far from the Fed’s own estimates of maximum employment, which are a precondition for raising interest rates. Congress should be capitalizing on this moment by making critical investments that fully employ the capacities of all Americans now and ensure broad-based prosperity over the long run.”

Claudia Sahm, former Federal Reserve economist and Senior Fellow at the Jain Family Institute

  • “We must keep perspective, and we must have a recovery for all. The Fed is committed to keeping interest rates low until people are back to work and inflation averages 2%. Neither is expected anytime soon. Even with the recent pickup in consumer prices, we have a long way to go. The extra strength this year will help make up for extra weakness last year. Some months with over 3% inflation and the rest of the year above 2%, isn’t even enough. But it’ll get us a recovery faster than pulling back now. That’s what matters.”

Vice Chairman of the Federal Reserve, Richard Clarida:

  • “If we saw evidence that there was a risk of a persistent upward drift in inflation expectations we would not hesitate to use our tools to offset that. […] The economy remains a long way from our goals, and it is likely to take some time for substantial further progress to be achieved.” [Bloomberg, 5/12/21]

Member of the Federal Reserve Board of Governors, Lael Brainard: 

  • “Remaining patient through the transitory surge [in inflation] associated with reopening will help ensure that the underlying economic momentum that will be needed to reach our goals…is not curtailed by a premature tightening of financial conditions.” [Financial Times, 5/11/21]

Director of U.S. Macro Investors Services at Oxford Economics, Kathy Bostjancic: 

  • “In the coming months, ongoing base effects, price increases stemming from the reopening of the economy and some pass-through of higher prices from supply chain bottlenecks should prompt higher inflation. However, we believe part of the acceleration in inflation will be transitory, and we share the Fed’s view that this isn’t the start of an upward inflationary spiral.” [BBC, 5/12/21]

Dean Baker, Senior Economist at the Center for Economic and Policy Research: 

  • “Millions of people have been needlessly denied the opportunity to work because of unfounded fears of inflation. Disproportionately, these people have been Black, Hispanics, people with criminal records and other groups facing discrimination in the labor market. It will be important not to repeat past mistakes as the economy recovers from the pandemic.
  • “#CPI overall story largely as predicted, major bounce back in areas like airfares, car insurance, and hotels (up 8.8 percent). Temporary shortage led to surge in used car prices and unusual hike in new car prices. Little basis for concern about lasting inflation” [Twitter, 5/12/21]

Josh Bivens, Director of Research at the Economic Policy Institute

  • “The evidence above is clear that the U.S. economy is not overheating and that today’s data reflect only extraordinary events of a year ago.” [Economic Policy Institute, 5/12/21]

Here’s what more experts have to say about inflation risks and the tools to deal with it: 

Chair of President Obama’s Council of Economic Advisers, Jason Furman: 

  • “Eventual higher interest rates from more expansionary fiscal policy are a plus not a minus […] Knowing the Fed is on top of its inflation mandate (which I think it is) allows fiscal policymakers to do more and take greater risks. That is a good thing because only fiscal policymakers can do things like child allowances and clean energy investments that serve broader goals.” [Twitter, 5/4/21]

Nobel Prize-Winning Economist Paul Krugman: 

  • “Pundits are panicking over popping prices. This was entirely predictable — and predicted: as the economy surged, bottlenecks and price blips were inevitable […] So, don’t panic. Yes, we might see overheating, and might need to tighten monetary policy down the road (even if Janet Yellen got in trouble for saying the totally obvious.) But we really shouldn’t get worked up about lumber prices etc” [Twitter, 5/5/21]
  • There’s an easy answer if inflation should start to rise: the Federal Reserve can tighten monetary policy. I’ve seen suggestions that this won’t work — either that the Fed will lack the will to tighten or that it can’t tighten without causing a recession. But when was the last time the Fed was too hesitant about tightening? I think you have to go back to Arthur Burns in the 1970s; its bias has gone the other way ever since.” [New York Times, 2/7/21]

President of the Federal Reserve Bank of Atlanta, Raphael Bostic: 

  • “We still are 8 million jobs short of where we were pre-pandemic and until we make substantial progress to close that gap, I think we’ve got to have our policies in a very strongly accommodative situation or stance.” [CNBC, 5/17/21]

David Beckworth, former Treasury Department Economist, and Ramesh Ponnuru, fellow at the American Enterprise Institute: Stop Worrying About Inflation

  • “The evidence that high inflation is on the way is weak. It’s too weak, actually: An economy on the verge of a robust recovery would be showing more signs of rising inflation. Right now, inflation appears more likely to stay below its optimal level than above.”
  • “The danger to which the inflation hawks are pointing is mostly illusory. The one the hawks themselves pose is all too real.” [New York Times, 2/17/21]

Eric Winograd, Senior Economist for Fixed Income at Alliance Bernstein:

  • “For the Fed, the risk of tightening policy prematurely is much greater than the cost of tightening too late…The same is true on the fiscal side. If you do too little, we risk a very weak economy. You do too much, we get an overheated economy. Oh well. We have the tools to deal with that.” [Politico, 2/11/21]

Treasury Secretary and Former Federal Reserve Chair Janet Yellen:

  • “My predecessor has indicated that there’s a chance this will cause inflation to rise. That’s also a risk we have to consider. I spent many years studying inflation and worrying about inflation and I can tell you we have the tools to deal with that risk if it materializes. But we face a huge economic challenge here, tremendous suffering in the country, we’ve got to address that – that’s the biggest risk.” [CNN, 2/7/21]

Federal Reserve Chair Jerome Powell:

  • If inflation were to move up in ways that are unwelcome, we have the tools for that, and we will use them. No one should doubt that.” [CNBC, 1/14/21]
  • “I’m much more worried about falling short of a complete recovery and losing people’s careers and lives that they built because they don’t get back to work in time.  I’m more concerned about…the damage that will do not just to their lives, but to the United States economy, to the productive capacity of the economy.  I’m more concerned about that than about the possibility which exists of higher inflation.” [White House Press Briefing Transcript, 2/5/21]
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