The BEA just published revised GDP estimates, and the main change was that cumulative real GDP growth from 2020 to today was revised up by more than 1%.
Comment from left field: Tyler Cowen and some others are ga-ga on AI. Maybe we see some higher productivity stats going forward, meaning lower inflation.
As usual, I think prosperity is always more important than shaving a percent or two off of reported inflation.
I do wonder why the Fed wants to reduce its balance sheet. Saves taxpayers a lot of money to hold onto it. Bank of Japan has a much larger balance sheet (relative to GDP) and low inflation.
The Fed building its balance sheet is a win-win? What if...the Fed buys Treasuries, and the sellers of the Treasuries reallocate capital into productive investments. This would be fantastic if there were a 10-year moratorium on all property zoning. Rents would cool off. Living standards would rise.
The Treasuries send interest income back to the government, saving taxpayers big time.
The Fed has a _Flexible_ Average* inflation Target, This means that it is willing to temporarily exceed the target when that facilitates the economy adjusting to extraordinary shocks like COVID/Putin. The Fed _said_ that over-target inflation was temporary and it it made it so.
I agree with Sumner qualitatively that the Fed delayed starting to disinflate too long so the total amount of over-target inflation WAS excessive, but nobody is perfect.
* "Average" is not the best word as it can suggest a backward-looking arithmetic mean. "Average means that the forward looking target is that inflation would be 2% PCE; the Fed would not not react to small month-to month fluctuations. But is would and should crank up over-target inflation in response to large shocks.
Mostly agree.
Comment from left field: Tyler Cowen and some others are ga-ga on AI. Maybe we see some higher productivity stats going forward, meaning lower inflation.
As usual, I think prosperity is always more important than shaving a percent or two off of reported inflation.
I do wonder why the Fed wants to reduce its balance sheet. Saves taxpayers a lot of money to hold onto it. Bank of Japan has a much larger balance sheet (relative to GDP) and low inflation.
The Fed building its balance sheet is a win-win? What if...the Fed buys Treasuries, and the sellers of the Treasuries reallocate capital into productive investments. This would be fantastic if there were a 10-year moratorium on all property zoning. Rents would cool off. Living standards would rise.
The Treasuries send interest income back to the government, saving taxpayers big time.
The Fed has a _Flexible_ Average* inflation Target, This means that it is willing to temporarily exceed the target when that facilitates the economy adjusting to extraordinary shocks like COVID/Putin. The Fed _said_ that over-target inflation was temporary and it it made it so.
I agree with Sumner qualitatively that the Fed delayed starting to disinflate too long so the total amount of over-target inflation WAS excessive, but nobody is perfect.
* "Average" is not the best word as it can suggest a backward-looking arithmetic mean. "Average means that the forward looking target is that inflation would be 2% PCE; the Fed would not not react to small month-to month fluctuations. But is would and should crank up over-target inflation in response to large shocks.
https://thomaslhutcheson.substack.com/p/monetary-story