PROJECT SYNDICATE: The Threat of Trumpflation, & a Fed War
To the extent that inflation hawks are serious about price stability and the long-term economic outlook, they should consider what would happen if Donald Trump were to return to the White House. The presumptive Republican presidential nominee has made his inflationary, financially destabilizing intentions all too clear…
BERKELEY – Inflation in the United States is lower than it was a year ago, and substantial economic weakness elsewhere is driving other central banks toward interest-rate cuts. With little empirical basis to believe that US monetary policy is not restrictive, I continue to believe that in 18 months, the US Federal Reserve will have wished that it had started cutting rates in January 2024.
If I am right, the US is not headed for a soft-landing path; it is already on the runway, albeit with a monetary-policy rudder steering sharply toward contraction, rather than being held in a straight-ahead neutral position.
Yet many commentators and Fed officials continue to believe that interest rates should remain at their relatively high levels, because they are fixated on the 1977-79 period, when a near-stabilized inflation rate spiraled out of control.
OVER AT PROJECT SYNDICATE: <https://www.project-syndicate.org/commentary/trump-inflation-fed-war-would-be-economically-financially-disastrous-by-j-bradford-delong-2024-05>