Macro Voices MacroVoices #508 Laskhman Achuthan: Inflation Cycles Amid Regime Change
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Nov 26, 2025 Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, shares his expertise on cycles and economic indicators. He discusses how cycle indicators hold up during regime changes and interprets recent policy shocks impacting growth and inflation. Achuthan describes a 'Goldilocks' scenario where growth strengthens while inflation remains contained. He compares the current AI bubble to the dot-com era and emphasizes the importance of monitoring wealth inequality and energy constraints. Overall, he highlights forward-looking inflation gauges and the nuanced timing of secular inflation risks.
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Cycles Work Through Regime Change
- Cycle indicators still signal inflection points reliably even during regime changes.
- Lakshman Achuthan says the indicators kept timing and direction correct across major 20th century regime shifts.
Goldilocks: Growth Up, Inflation Contained
- ECRI's forward-looking indicators showed growth firming and inflation fading into mid-2025, creating a Goldilocks setup.
- Lakshman highlights a simultaneous cyclical upswing alongside structural AI investment drivers as unusual and constructive.
K-Shaped Consumption Creates Fragility
- Consumption is K-shaped: the top decile supports aggregate demand while the median household faces stress.
- That narrow consumption base creates fragility and caps broad inflation pressures, Lakshman warns.