Inflation hysteria? Paul Krugman makes huge call on Fed “success story”

Distinguished Professor of Economics at the Graduate Center of the City University of New York, Paul Krugman, has made a big call on the inflation problem gripping most parts of the world.

Krugman, who is a winner of the Nobel Memorial Prize in Economic Sciences, believes the inflation problem has been hyped-up by the media.

He says right now we are at “peak inflation hysteria”.

“The media seem to be reaching peak inflation hysteria at the very moment early indications suggest that inflation, while still too high, is receding,” he wrote on Twitter.

Krugman backed up his view with a series of data points.

“First, absolutely no sign of expectations getting de-anchored. Market expectations of longer-term inflation have risen much less than recent price rises. (This is) also true of consumer expectations from Michigan and NY Fed surveys,” he said.

He also shared the below table which he said “shows evidence of underlying inflation slowing.”

Inflation 1 Paul Krugman
Image: Twitter, @paulkrugman

And additionally, another chart that he says shows evidence of slowing wage growth.

Inflation 2 Paul Krugman
Image: Twitter, @paulkrugman

Federal Reserve success story?

While the Federal Reserve has come under intense scrutiny for maintaining a “transient inflation” narrative for too long, Paul Krugman says the U.S. economy could be on track for a Fed success story.

“Far too soon for Fed to consider calling off rate hikes. But suppose we enter 2023 with around 3% inflation and around 4% unemployment, which seems quite possible. Given the shock to the system, won’t that count as a success story?”

How well do you think Krugman’s comments will age? Find us on Twitter @asia_markets