Paul Krugman, a prominent American economist, has weighed in on the current inflation debate, citing a recent survey by the Atlanta Federal Reserve that suggests stable inflation expectations.
What Happened: On Sunday, Krugman took to social media platform X to share his thoughts on the matter. He wrote, “Is inflation taking off again? Businesses don’t think so: Atlanta Fed survey shows inflation expectations stable at slightly above 2 percent.”
Why It Matters: Krugman’s comments come at a time when the topic of inflation is a major concern for the market. The Federal Reserve’s strategy and the impact of government spending on inflation have been hotly debated. Former Dallas Fed President Robert Kaplan recently suggested that government spending was contributing to sustained inflation, making rate cuts unadvisable.
However, Goldman Sachs economist Jessica Rindels has predicted a decline in the core Personal Consumption Expenditure (PCE) Inflation for the rest of the year, attributing the recent inflation increases to transient factors.
Meanwhile, the latest data on U.S. private sector activity indicates a significant and unexpected slowdown in growth, marking the softest expansion since December. This slowdown has been accompanied by a welcome moderation in the rates of increase for selling prices in both goods and services.
Notably, the drivers of inflation have changed. Manufacturing has now registered a steeper rate of
price increases in three of the past four months, with factory cost pressures intensifying in April amid higher raw material and fuel prices, contrasting with the wage-related, services-led price pressures seen throughout much of 2023,” Chris Williamson, chief business economist at S&P Global Market Intelligence stated.
Contrasting Krugman’s views, economist Peter Schiff cautioned in March that despite the Federal Reserve’s signaling of three potential rate cuts this year under Jerome Powell’s leadership, the central bank’s thinking might be erroneous, especially with the annual rate of personal consumption expenditure index ticking up.
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