Moody's Talks - Inside Economics Crazy But Correct
Nov 22, 2024
Jonathon Hazell, an Assistant Professor of Economics at the London School of Economics, shares his insights on inflation's complexities. He explains the surprising stability of inflation before the pandemic and the factors driving its rise recently. Hakell discusses the public's heightened sensitivity to inflation compared to unemployment, questioning the Fed's approach to monetary policy. The chat also probes into how incoming Trump administration policies may impact inflation trends, alongside a light-hearted take on unconventional Thanksgiving dinner choices.
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Pre-2020 Inflation Puzzle
- The period before 2020, marked by low inflation and unemployment, puzzled economists.
- This "missing disinflation" or "missing reinflation" era saw little co-movement between these factors.
Inflation Volatility Explained
- Anchored inflation expectations and a flat Phillips curve explain both volatile and stable inflation periods.
- The increasing credibility of the Fed anchored expectations after 1985, reducing inflation volatility.
Georgia Runoffs and Inflation
- Hazell's research used the 2021 Georgia Senate runoffs to isolate the impact of deficits on inflation.
- The study found that deficit stimulus caused about one-third to one-half of the inflation in 2021-2022.