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One thing about inflation is that it will never go back down.

Best case scenario is it stops growing.




Of course it goes down. Take a look at this chart, expand to 10y or max; inflation was about -0.75% in early 2020. In fact, it went into negative territory many times in the last decade. Prices go down during recessions, particularly.

https://tradingeconomics.com/united-states/inflation-rate-mo...

OTOH, the Fed has goal of maintaining a 2% inflation target; so in the long run you can expect it to go up. For many many years before the pandemic, it failed to achieve that goal. Inflation was too low; which means job growth, wage growth, and gdp was below potential.


Prices are an index and very rarely is the index not at an ath. Even in The periods you mentioned, the index was only off ath for a month or 3 and that’s mostly noise from Energy prices, so no it never reached a new equilibrium below where it was (that would be disastrous)

https://fred.stlouisfed.org/graph/fredgraph.png?g=SF8B


But our unemployment rates were so low in 2019, how could they have been lower with higher inflation?


We have seen unemployment fall slightly below 2019 levels, but the more significant result of greater demand stimulation would have been reaching those levels of unemployment much faster, rather than taking a decade to recover from the great recession.


That seems to be entirely explained by labor force participation. Note the skyrocketing amounts of people with more than one job


high employment and higher inflation can go hand in hand, actually, just high unemployment and deflation can (in a recession).


Yeah that’s my point, inflation rates don’t really influence unemployment rates except at the margin


This is the one thing which pisses me off when corporate brass justify not adjusting pay because "inflation is just transitory".


Do you mean prices, perhaps? Inflation is a derivative and can go down to zero with prices being unchanged


Do you mean the inflation rate?


Deflation can occur; it's rare, but it's not a never scenario.


It has never occurred for more than a few months in The past 50 years and has never returned to a new equilibrium below where it was.

This is also a data resolution problem. Sure we measure in months, but is that a reasonable resolution? Why not days? Years? Etc.




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