Paul Krugman Believes War On Inflation 'Pretty Much' Won Without Recession

The battle against inflation has been largely victorious, without the need for a recession, according to well-known economist Paul Krugman. This comes despite the recent U.S. inflation surge of 3.7% year-on-year in August, as reported by the Consumer Price Index (CPI),  Business Insider reported. 

Krugman took to X, formerly known as Twitter, following the CPI revelation to state that a recession if it does occur, would likely be the result of a policy error rather than a necessary tool for curbing inflation.

Contradicting the popular opinion among economists that unemployment needs to skyrocket and the economy must significantly decelerate to reduce inflation, Krugman recently argued in a New York Times op-ed that underlying inflation has halved since the previous year, according to certain statistical models.

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Krugman also cautioned that the economy may experience fluctuations due to the “noisy data” from service price estimations, a potential culprit for the previous month’s core inflation distortion.

He further highlighted a potential “Goldilocks” scenario where inflation cools without causing a recession. This was supported by a report from the Federal Reserve Bank of Chicago, which asserted that further monetary policy tightening may not be needed as the 11 rate hikes have already served their purpose.

A study by the Roosevelt Institute also shed light on the reason behind the rapid inflation fall without a recession. The study concluded that the combination of resolved supply shocks and a subtle demand decrease has significantly reduced inflation without affecting employment levels.

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Photo via WTO on Flickr