Paul Krugman Sees 'No Landing,' 'Air Pocket' Risks After Inflation Print: What They Mean

Nobel laureate and noted economist Paul Krugman believes although the consumer price inflation for February isn't great, the figure isn't grim either.

Krugman also highlighted the rise in “super-core inflation” — a new buzzword taken into account by the Federal Reserve to describe the price of services like the cost of visiting barbers, lawyers, or plumbers. It excludes housing, food and energy costs.

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In February, "supercore" services inflation increased by 0.2% for the month and was 4% higher compared to a year ago. The headline CPI rose 6% in February, down from 6.4% in January, according to data the Labor Department reported on Tuesday. On a month-over-month basis, CPI was up 0.4%, which was also in line with estimates.

Price Action: Major Wall Street indices rose on Tuesday. The SPDR S&P 500 ETF Trust SPY closed 1.65% higher and the Invesco QQQ Trust Series 1 QQQ gained 2.3%.

Krugman noted although the inflation came down, the economy seems to be still running hot which could be a cause of concern in the Fed's fight against price rises.

"My story for where we are: inflation came down substantially with no significant rise in unemployment, suggesting a near-vertical Phillips curve, but the economy is still running too hot to get it down to target," he said.

“Two risks are a ‘no landing’ scenario, in which the economy just doesn’t cool off, and an ‘air pocket’ scenario in which past rate hikes finally hit construction employment hard. Absent SVB Fed would probably just keep gradual hiking; maybe even with SVB,” Krugman tweeted.

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