The Future of Inflation

We expect the dollar to continue to fall in the decade ahead. That should put some upward pressure on the price of imports, which equal about 15% of GDP last year. A stalling out of a long trend of globalization since 2008 could also boost prices. Tight labor supply caused by an aging demographics could at least sustain inflation. And finally, there is government policy. The Federal Reserve has been able to adopt ever more dovish policy positions in response to economic downturns without paying inflation penalty. But we do not expect to return to the zero ban for the federal funds rate.