CBO predicts annual inflation of 2% for next decade


In response to Mr. Blasier’s letter on May 4, I respectfully contend that his views on inflation might be suffering from the adage “a little knowledge is a dangerous thing”. Especially so, considering he predicts a 30% inflation rate. Granted, I’m no more an expert on economics than he is, but we do have a ready source of experts we can turn to in these moments: the Congressional Budget Office. The CBO is a nonpartisan federal agency created to provide expert, consensus economic information and predictions to our national legislative branch. This advice covers and combines both general economic trends and the likely outcomes from specific policy decisions. In CBO Publication 56989, accessible at https://www.cbo.gov/publication/56989, they project that annual inflation, computed as PCE Price Index, will rise from 1.7% this year to 2% by 2024, maintain an average of 2.1% for the second half of the decade, and then finally fall back to just below 2% by 2030.

Annual inflation stays within such tight boundaries mostly because of the Federal Reserve’s avowed goal of keeping inflation as close to 2% as possible; when it threatens to go beyond that, they increase federal interest rates, which applies a strong downward pressure on inflation. As it dips below that, the Federal Reserve cuts interest rates to stimulate the economy. I agree that excessive borrowing by a national government can lead to real economic hazards, but we must arm ourselves with the best available information so that we might intelligently discuss and prepare for these dangers. In this situation, high inflation is not among them.

Jesse Traub



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