'Inflation Bump Is Over,' Says Paul Krugman: How Friday Data Proves Him Right

Nobel Prize-winning economist Paul Krugman has consistently expressed optimism about cooling inflationary pressures. His recent declaration that the “inflation bump is over” was quickly followed by positive Personal Consumption Expenditure (PCE) data.

What Happened: In a post on X Thursday morning, Krugman compared recent Federal Reserve language to January 2020.

Krugman was quickly proven right.

On Friday morning, the Bureau of Economic Analysis released its monthly PCE data. The PCE inflation rate was recorded at 2.7% year-over-year in April, matching expectations. Personal spending increased at a 0.2% pace, under 0.3% expectations.

Why it Matters: The Federal Reserve closely observes inflation data, particularly the PCE, in managing monetary policy. Amid a sustained period of high interest rates, encouraging signs in inflation data make a Fed pivot more likely. Many observers have still expressed skepticism about the expectations of rate cuts, and markets only predict one to two rate cuts by the end of the year.

Krugman has supported the economic policy of President Joe Biden‘s administration. Krugman described Biden’s self-monikered “Bidenomics” as “pure Goldilocks.” In September 2023, Krugman declared that the inflation war was “pretty much won.”

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Also Read: Paul Krugman Schools Americans ‘Righteously Angry’ About Soaring Costs: Biden’s Price Levels Mirror Reagan’s Inflation Triumph

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