Interim Inflation

Last spring, inflation, or deflation, as measured by the CPI was falling at -4%/quarter and producer prices were declining at a rate of -8%/year, yet no lasting deflationary pressures appeared. The same holds true now for inflation. Come fall, schools will open, employment will rise, production will increase, and demand will soften from its current stimi-induced torrid pace because real income minus massive fiscal freebies is up just 1% Y-o-Y.