Volcker Says Not to Worry About Inflation (For Now)

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"Volcker Says Not to Worry About Inflation (For Now)"

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These remarks from Paul Volcker mostly seem a bit too cryptic for me to comment on in a reasonable way. But I take it that Volcker has credibility as an inflation-fighter, so I hope people will listen when he says this shouldn’t be the worry for now:

“The inflation problem, which should be a real threat for the future, is not right on the doorstep,” he said. “But two or three years from now that may be the critical problem, how that’s handled. Because, given what the Federal Reserve has been doing, it’s going to be harder to retrace their steps, so to speak, than it ordinarily would be.”

What I see this as is mostly reason to be worried about a prolonged recession. At the moment, the Fed is engaged in massive expansion to get the economy growing again. That’s smart. But if it works, then we really will need to start worrying about inflation. But efforts to curtail inflation could mean that even when we do return to growth, it’s sluggish growth carried out in the face of monetary contraction.

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