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The Inflation Vigilantes Are Still Missing

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Paul Krugman:

Non-inflation Watch: Today’s personal income report was predictably dreary, as the march to a lost decade (or more) continues apace. But let me highlight one piece of the report: the inflation, or lack thereof. The personal consumption expenditures deflator fell.... Many of the people who keep seeing runaway inflation just around the corner made a big deal of last month’s PCE core, which rose at an annual rate of 3.1 percent. Aha! they said: inflation is here. But some of us argued that this was a temporary blip, driven by the indirect effect of commodity prices even on core prices. And all consumer price index-based measures of core inflation turned down last month.

Now the same thing is happening with the PCE core, which rose at an annual rate of only 1.3 percent in June. Later today we’ll get the Dallas Fed trimmed mean measure, which was already down in May and will almost surely show further decline in June.

So once again the usual suspects — the people who predicted runaway inflation from Fed expansion and soaring interest rates from federal borrowing — are being proved wrong, while [Hicksian] textbook macroeconomics is continuing to work just fine.

Too bad the people who get everything wrong are driving Very Serious discourse and policy.