The Boston Fed’s Weird Theory of Inflation
The Federal Reserve has long maintained that keeping inflation expectations “anchored” is crucial to controlling actual inflation. The doctrine sounds tidy: so long as the public doesn’t expect too much inflation, inflation itself is unlikely to rise sustainably.
A new paper from researchers at the Boston Fed warns those anchors may be slipping. Household inflation expectations, it claims, have surged to levels not seen since the 1970s—signaling a dangerous “de-anchoring” that could fuel another inflation surge. But their warning rests on questionable measurement choices, contradictory data, and a misleading citation of academic research.
In “Why Have Inflation Expectations Surged Recently? A Historical Perspective,” Philippe Andrade and Michael Wicklein suggest we’re seeing a replay of the 1970s. Their model tries to explain household inflation expectations using recent moves in “salient prices” l
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