Q&A: US inflation will not fall back to 2% in the future
Woody Brock | SED | 05 October 2022
Inflation will not fall back to the 2% level that the US Federal Reserve wants, and that we had pre-Covid. Two underlying structural changes that have nothing to do with today’s shortage-based inflation will keep US inflation at about 4% in the future:
- The long-overdue rise in the cost of labour; and,
- A permanent doubling of the size of the US fiscal deficit as a percentage of GDP.
But the news is not all bad. The IT-based technology revolution is continuing, and as we have argued for at least 10 years, this revolution has been the most important reason why inflation has been droppin...