Odd Lots Jason Furman on Red-Hot Inflation and What To Do About It
Nov 22, 2021
Jason Furman, an esteemed economics professor at Harvard and former chair of the Council of Economic Advisors under Obama, dives into the hot topic of inflation. He shares insights on why inflation may exceed expectations next year and discusses the Fed's need for a strategic shift. Topics include the intricate relationship between supply chain issues and consumer demand, as well as monetary policy's impact on the economy. Furman advocates for a data-driven approach to policy adjustments while addressing the challenges of managing inflation in a recovering economy.
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Inflation Prediction
- Jason Furman prefers discussing inflation using concrete numbers and probabilities rather than the vague term "transitory".
- He predicts inflation will decrease in 2022 but remain higher than the Fed's target, likely between 3% and 4%.
Macro Inflation View
- Furman emphasizes a macro approach to inflation, focusing on overall price levels rather than relative price changes.
- Elevated demand due to increased household savings, fiscal stimulus, and low interest rates, coupled with supply constraints, contributes to higher inflation.
Inflation Concerns
- Public dislike of inflation is a valid concern, although economists might downplay it.
- Current policies may be increasing prices more than employment, raising the risk of a hard landing and impacting financial markets negatively.