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    NewsHow is the war against inflation going?

    How is the war against inflation going?

    The US economy is not currently in a recession.

    No, two quarters of negative growth is not, regardless of what you may have heard, the “official” or “technical” definition of a recession; that determination is made by a committee that has always been based on various indicators, especially job growth.

    And how Jerome Powellchairman of the Federal Reserve, noted on Wednesday, the labor market still looks strong.

    That said, the US economy is definitely slowing downbasically because the Federal Reserve is deliberately engineering a slowdown to reduce inflation.

    And it’s possible that this slowdown will eventually be severe and broad enough to earn the R label.

    In fact, on this question I think I’m a bit more pessimistic than the consensus.

    I think the odds are at least 50-50 that history will say that we experienced a mild recession in late 2022 or early 2023, which caused a modest increase in the unemployment rate.

    But what’s in a name?

    The real question is whether a moderate slowdown, whether called a recession or not, will be enough to control inflation.

    And the news on that front has been quite encouraging lately.

    Obviously, gasoline prices have dropped:

    nearly 80 cents a gallon since its peak in mid-June.

    Remember those scary stories about $6 a gallon in August?

    More importantly, business surveys, which often detect economic turning points long before official statistics, are beginning to suggest a significant drop in headline inflation.

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    For example, an S&P Global survey found that while private-sector companies continue to raise prices, the rate of inflation “is now down to a 16-month low.”

    The financial markets have taken notice.

    The expected rate of price increase over the next year implied by the inflation sw markets (don’t ask) has plunged from over 5% in early June to 2.45% as of Thursday morning.

    Medium-term inflation expectations also they are down.

    Now, it is too much, too soon to declare victory in the fight against inflation.

    there have been several false sunrisess on that front over the course of the last year and a half.

    And there’s a lot of room for discussion about the level of “core” inflation, a loosely defined term, but generally speaking, the part of inflation that is difficult to reduce once it rises.

    The serious economists I speak to are very eager to see the release of the employment cost index on Friday, which is supposed to measure what is hpening with employment costs.

    Will it confirm or contradict the parent slowdown in wage growth visible in simple measures of average wages and at least one influential survey?

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    Well, we’ll have to wait and see.

    The good news is that politicians seem willing to do just that.

    In my view, the most encouraging aspect of Wednesday’s Fed statement was the paragrh declaring that the committee that sets monetary policy is prepared to be flexible, that it “will continue to monitor the implications of incoming information” and ” would be prepared to adjust the monetary policy stance accordingly.”

    that’s a rejection not too subtle of the inflation hawks’ demands that the Fed commit now now now to a long period of extremely tight money.

    As I suggested, the early signs are that the Fed is winning its war on inflation, and doing so faster and easier than most observers expected.

    What will it mean if these first omens are confirmed?

    The big answer, I would suggest, is that we will have to reevaluate recent economic policy.

    As everyone should know (although many probably don’t), the US economy has been remarkably successful in restoration of jobs lost during the pandemic crisis.

    This good news has been overshadowed by high inflation, leading to many claims that US economic policy got it all wrong.

    But much of the recent inflation reflects global forces outside of US control, which is why inflation has risen almost everywhere, not just here.

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    And if the portion of excess inflation that US policy reflects can be reversed fairly quickly, without severe costs, a fair reading of the record would say that the policy was actually very successful, that a temporary rise in inflation It was a price worth paying for avoid the kind of long-term depressed economy we experienced after the 2008 financial crisis.

    That said, for a time it seemed that a bout of inflation had caused permanent, even catastrophic, damage through the political process, because it had undermined the prospects for meaningful action on climate change.

    An episode of high inflation is not the end of the world; lack of action on climate it might as well be.

    But on Wednesday (!) Senator Joe Manchin declared himself convinced that a bill addressing climate change would actually reduce inflation.

    It will.

    While I’m not ready to count my chickens until they’ve been formally signed in the Oval Office, right now it looks like we’re in for a quick recovery and desperately needed investment in America’s future.

    So while the preliminary GDP figure (which is likely to be heavily revised) was negative, from my point of view, the overall economic news looks quite positive.

    c.2022 The New York Times Company

    Awutar
    Awutar
    This post is posted by Awutar staff members. Awutar is a global multimedia website. It serves as a source of News, Business, Opinion, Analysis, Sports, Health, Fitness, Technology, Education, Travel, and More. If you want to get in touch with us write via: [email protected]

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