There have been a few false alarms about a possible upsurge in inflation in the US in the past few years, even as core inflation on most measures has remained extremely subdued. There is an entrenched belief among some observers that the huge rise in central bank balance sheets must eventually leak into consumer prices, and they have not been deterred by the lack of evidence in their favour so far.
Another such scare has been brewing recently. Core CPI inflation is running at 1.9% on a year ago, even after today’s reassuring data for June. James Bullard, the President of the St Louis Fed, is warning that an upside inflation surprise is feasible in the near future, if indeed it is not already happening. Although Mr Bullard describes himself as the “north pole of inflation hawks”, he has not previously been a doom monger about immediate prospects for inflation, so his views deserve to be taken seriously. Read more