Paul Krugman Argues Inflation Isn't As Wild As People Think: Slowing Price Rise 'Hasn't Broken Through To Public Consciousness'

Nobel laureate and economist Paul Krugman said the big deceleration in inflation during the second half of 2022 “hasn't broken through to public consciousness” as scores of people still think price rises are running wild.

“Several reasons for this. Too many media reports focus on y-o-y inflation, so miss the big turn. Traditional core inflation still reflecting rent increases from a year ago. And asymmetric reporting: breathless coverage of rising inflation, disinflation not so much,” Krugman tweeted.

Also Read: Investing In Exchange Traded Funds: A Beginner's Guide

The noted economist also pointed out that the recent wage growth data doesn't exactly indicate that wage prices are spiraling.

Wage Growth: Average hourly earnings in December rose 0.3% after gaining 0.4% in the previous month. That reduced the year-on-year increase in wages to 4.6% which is the smallest rise since August 2021. However, economists are of the view it is too early to forecast wage price growth would slow down rapidly.

This is because of the recent lay-offs in the high-paying tech industry while hiring continued in other sectors where pay is relatively lower.

“We'll get more data in the weeks ahead, but at this point the burden of proof lies on anyone claiming that we had more than a, well, transitory inflation spike that's mostly behind us,” Krugman noted.

Last week, Federal Reserve Bank of New York President John Williams indicated he is anticipating more rate hikes ahead and that he sees signs that price rise pressures might be starting to cool off.

“With inflation still high and indications of continued supply-demand imbalances, it is clear that monetary policy still has more work to do to bring inflation down to our 2% goal on a sustained basis,” Williams said in the text of a speech to be delivered before the Fixed Income Analysts Society in New York.

Read Next: US Lawmakers Eye Replacing Fixed Dollar Debt Ceiling With Percentage Of Economic Output

Photo via WTO on Flickr