Inflation Alert

Photo: fmpalihue.com

By Isaac Cohen*

Even before the approval of the last $1.9 trillion rescue package there was concern about the risk that a measure of such magnitude could generate inflation and also financial instability. However,  this time the concern did not come from those who traditionally preach austerity, when they are in the opposition.

The alert came from the ranks of prominent economists affiliated with the Democratic Party, led by Professor Lawrence Summers, past president of Harvard University and former Treasury Secretary in the final days of the Clinton administration and economic advisor in the early days of the Obama administration.  Professor Summers, in a Washington Post op-ed (02/05/21), characterized the Rescue Plan, together with the package approved last December, as “the boldest act of macroeconomic stabilization policy in U.S. history,” concluding with the warning that such “macroeconomic stimulus… will set off inflationary pressures of a kind we have not seen in a generation.”

Former head of the central bank and Treasury Secretary Janet Yellen, the first person to have run both key economic agencies, previously had said the risk of doing too little outweighs the risk of overheating the economy. Also, a pragmatic response was that we need to win the war against the virus first.

*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.

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