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.
The podcast explores the historical dynamics of inflation, highlighting a notable shift in its correlation with unemployment over recent decades.
Joe Hazell emphasizes the complexities of identifying inflation drivers, noting significant contributions from government deficits and supply chain disruptions since 2021.
Public perception reveals that individuals prioritize inflation concerns over unemployment, suggesting a need for policies that address both economic metrics and lived experiences.
Deep dives
Exploring Social Media Dynamics
The conversation begins with the hosts discussing the rise of new social media platforms like Blue Sky, emphasizing the importance of having a competitive landscape among social media companies. The participants note how different subgroups of users have migrated to various platforms, with academics gravitating towards Blue Sky while media professionals remain on Twitter. This segment highlights how the creators engage with multiple platforms for different purposes, suggesting that the ability to switch platforms freely can help keep corporations accountable. The dynamic reflects a broader trend in digital engagement where social media serves various audiences and interests.
The Role of Inflation in Economic Research
The guest economist expresses a keen interest in inflation as the central theme of their research, citing its relevance both in periods of high inflation and in times of stability. They discuss the historical context of inflation dynamics, particularly the contrasting behavior observed from the 1980s onwards compared to more recent trends. The discussion reveals how inflation and unemployment were closely linked during earlier economic periods but became less correlated over time, raising questions about the mechanisms driving these shifts. The guest's research seeks to unravel the complexities of these dynamics, considering the ongoing challenges posed by rising prices.
Pinpointing Causes of Recent Inflation Surges
The analysis focuses on the significant inflation experienced globally starting from 2021, which coincided with high government deficits resulting from fiscal stimulus measures. The economists try to distinguish between supply chain disruptions and increased demand as contributors to the inflation surge, underscoring the difficulty in isolating these factors. A critical examination of events, such as the 2021 Georgia Senate elections, is presented as a turning point that influenced expectations about fiscal policies and their inflationary impacts. The findings suggest that while deficits contributed to inflation, the interplay of multiple shocks deserves attention in understanding the overall inflation picture.
Inflation Expectations and Policy Implications
The dialogue emphasizes that the expectations of inflation significantly influence both consumer behavior and policy decisions moving forward. An established framework indicates that persistent high deficits may lead to higher inflation expectations among market participants. Economists weigh the potential outcomes of deficit spending against the Fed's monetary policy response, highlighting the tension between fiscal stimulus and its inflationary risks. As market expectations evolve, the need for a balanced approach becomes paramount in achieving economic stability, which underlines the complexity of modern economic policymaking.
Public Perception and Attitudes Toward Inflation
The podcast touches upon the public's perception of inflation, revealing a strong sentiment that inflation is more concerning than unemployment. The discussion leads to insights about how people's lived experiences during inflationary periods shape their attitudes, often leading to a sense of dissatisfaction regardless of aggregate data trends. The correlation between consumer sentiment, rent prices, and overall inflation emphasizes the disconnect between economic indicators and public opinion. This reflection urges a renewed focus on understanding how inflation impacts individuals holistically, influencing future policy designs.
Joe Hazell, Assistant Professor of Economics at the London School of Economics, joins the podcast to discuss inflation. Joe breaks down the reasons for the lack of inflation in the pre-pandemic period and the primary causes of inflation over the past four years. The team discusses why the average American is much more sensitive to inflation than unemployment and whether the Fed should rethink how it balances the two when considering monetary policy. Finally, the discussion turns to the incoming Trump administration’s policies and their potential effect on inflation over the next few years.
Hosts: Mark Zandi – Chief Economist, Moody’s Analytics, Cris deRitis – Deputy Chief Economist, Moody’s Analytics, and Marisa DiNatale – Senior Director - Head of Global Forecasting, Moody’s Analytics
Follow Mark Zandi on 'X' @MarkZandi, Cris deRitis on LinkedIn, and Marisa DiNatale on LinkedIn
Questions or Comments, please email us at helpeconomy@moodys.com. We would love to hear from you.
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