Is our current inflation temporary? Look at the numbers – The Property Chronicle
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Is our current inflation temporary? Look at the numbers

The Professor

Jerome Powell, Chairman of the Board of Governors of the Federal Reserve System, has said that the current uptick in inflation is temporary and he expects inflation to subside in 2022. Despite rising inflation, the Fed is not in an inflation-fighting mood.

Powell’s view rests heavily on interruptions in the supply chain that have caused temporary shortages leading to price spikes. Powell recognises that declines in demand in 2020 led to low inflation that year and says that the 2021 inflation spike is only offsetting unusually low inflation from 2020.

Once people expect inflation, they are quicker to raise prices

There are arguments leaning in the other direction, however. Most significantly, the effect of inflationary expectations. Sellers are reluctant to raise prices when inflation is low, so it takes a while for inflationary monetary policies to result in actual inflation. Once people expect inflation, they are quicker to raise prices to keep up with the general rise in prices. As the 1970s showed, inflation, once started, can be difficult to stop.






The Professor

About Randall G Holcombe

Randall G. Holcombe is DeVoe Moore Professor of Economics at Florida State University. He received his Ph.D. in economics from Virginia Tech, and taught at Texas A&M University and at Auburn University prior to coming to Florida State in 1988. Dr. Holcombe is also Senior Fellow at the James Madison Institute and is Senior Fellow at the Independent Institute in Oakland, California. Dr Holcombe is the author of 20 books and more than 200 articles published in academic and professional journals. His books include 'Political Capitalism: How Economic and Political Power Is Made and Maintained' (2018) and 'Coordination, Cooperation, and Control: The Evolution of Economic and Political Power' (2020).

Articles by Randall G Holcombe

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