Will a Bit of ‘Good News’ on Inflation Hold?

By at 27 May, 2022, 1:33 pm

by Raymond J. Keating –

Since early last year, the debate over the causes of inflation has raged almost as hot as inflation itself.

How much of this bout of inflation is transitory? How much is due to the Federal Reserve running breathtakingly loose money for more than 13 years now? How much is due to pandemic-related supply chain challenges, along with tight labor markets? On it goes, and all are legitimate questions.

Meanwhile, inflation has been running rampant. Indeed, the U.S. economy has not seen an inflation run like this since the 1970s and very early 1980s. Pick whatever inflation measure you like, they all have been communicating the same thing.

Now, the latest personal income report from the U.S. Bureau of Economic Analysis has arrived to tell us that the PCE (personal consumption expenditures) price index – a favorite inflation measure of the Federal Reserve, by the way – registered inflation at only 0.2 percent in April.

That was down from 0.9 percent in March, and the slowest rate since November 2020.









Source: Federal Reserve Bank of St. Louis, FRED

That’s certainly welcome news – indeed, most welcome. And it jibes with the April Consumer Price Index report that showed CPI inflation running at 0.3 percent (See SBE Council’s analysis).

The debate now will shift a tad to whether this is the start of a healthy trend, or merely a one-month rest, if you will. It must be kept in mind that when inflation takes hold, significant volatility from month to month is to be expected.

Indeed, one month’s data does not mean that inflation has been broken. But while we all hope that this, in fact, is a signal that inflation is beginning to calm, policymakers need to get focused on policies that will help both in boosting economic growth and in fighting off inflation.

That means, as SBE Council has noted many (many) times, substantive and permanent tax and regulatory relief, advancing free trade, reining in the size of government, and getting the Fed focused exclusively on price stability.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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