Economist Paul Krugman Reacts To May CPI Data: 'Inflation Has Basically Been Defeated'

Consumer Price Index (CPI) data released by the U.S. Bureau of Labor Statistics on Wednesday was cooler than expected. Shortly afterward, Nobel Prize-winning economist Paul Krugman reacted to the data, expressing optimism about the economy’s future.

What Happened: Krugman posted on the social media platform X shortly after the report was released.

Why it Matters: Many economists, including Krugman, have preferred core inflation excluding shelter and energy. Shelter inflation typically lags behind other changes in market prices. Research, including a 2022 study from the Bureau of Labor Statistics, suggests that shelter inflation artificially elevates core inflation data for several quarters.

Krugman has been known for his previous dovish sentiment on inflation data and Federal Reserve interest rate policy; the economist similarly stated that the “inflation bump is over” following positive Personal Consumption Expenditure (PCE) data in May. In September 2023, Krugman declared the war on inflation “pretty much won.”

The Federal Funds Rate has been at an elevated level for several quarters, but betting markets such as Kalshi now forecast two rate cuts by the end of the year.

Also Read: US Median Housing Rent Jumps To $1,653, Highest Since 2022: ‘Demand From Young Renters Remains High’

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