Where is Inflation?
By Isaac Cohen*
One of the salient traits of the slow economic reactivation of the US economy is low inflation. For more than two years, the rate of inflation has remained below the objective of 2 percent preferred by the central bank. Additionally, unemployment is declining.
Last month, it reached 5.9 percent, approaching the so called “natural rate of unemployment” of 5.5 percent, under which it supposedly generates inflationary pressures. Even so, wages remain stagnant to the point that David Leonhardt, in The New York Times, wrote about “the great wage slowdown of the 21st century.”
In fact, the concern goes in the opposite direction. As described by the President of the Federal Reserve Bank of New York William Dudley, in a speech last week, the strong dollar and weak world economic growth, together with low energy prices, can “damp inflation pressures.”
The issue which dominated the last annual meetings of the International Monetary Fund and the World Bank, held last week in Washington, was the slowdown in the world economy, including Europe, Japan, China and most emerging markets. Also, most commodity prices have declined, even oil prices, which were stable at around $100 per barrel for the last three years, have fallen to $85 dollars.
Therefore, those concerned about the perils of inflation will have to continue “crying wolf,” for a bit longer.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC