Low Inflation: The Good and the Bad
While policy makers at the fed were in general agreement when they raised rates in June, there is increasing divergence about the necessary degree of urgency in continuing to raise rates going forward owing to persistently low inflation. While Chair Yellen hopes that recent weakness in the inflation data reflects one off developments, ongoing technological advancements and caution on the part of consumers present secular headwinds to achieving higher inflation. It appears inflation is an increasingly global process. The benefit is lower and more stable inflation nearly everywhere. The downside may be that domestic monetary policy is losing its potency and, like inflation, low and stable rates may be with us for some time.