Monday, February 15, 2021

Johns Hopkins Professor Warns Accelerating Price Inflation is Just Around the Corner

Steve H. Hanke, Professor of Applied Economics and Founder & Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at the Johns Hopkins University, is warning about coming price inflation.

Boy, does Prof. Hanke get this right!

Monetary policy under current Federal Reserve Board governors and district presidents has been completely irresponsible.

In the EPJ Daily Alert, I am forecasting a climb within months to a price inflation rate, as measured by government price indexes, of 3.0%. There will be only extremely limited concern at the Fed at this rate, despite their having a "target" price inflation of 2.0%.

This will then be followed by a fairly rapid climb in price inflation to the 5.0% range. The Fed will then get concerned but to "battle" price inflation at this level, the Fed would have to raise short-term rates to the 7.0% range and that is not going to happen anytime soon. The current Fed funds rate, controlled by the Fed is set at a current target range of only 0.0% to 0.25%.

There is a possibility that price inflation could hit 10% within 18 months or so.


1 comment:

  1. As an economist, where do you get the 10% inflation possibility prediction? Is there some formula you are applying based on, say, money supply numbers? We know that the money supply numbers are exploding and we know, everything else equal, that this may lead to higher prices for raw materials, capital goods and consumer goods, but how does a 10% (or 4% or 12.5% increase) drop out of the "analysis"? And if everything else is NOT equal (a change in cash-balances preferences for example), is this factored into your analysis? Just curious, Robert.