February 2, 2023

TYLER COWEN: Is the US economy in danger of reheating?

It’s ironic that a spell of slow inflation may bring about faster inflation, but that’s how the logic of expectations works

02 February 2023 – 05:00

It seems like only yesterday that the inflation debate was all about “Team Permanent” vs “Team Transitory”. But after several months of low inflation data, a kind of consensus has arisen: inflation has revealed itself to be transitory.

This is only a temporary consensus. There are signs that some economies, including that of the US, may experience a phenomenon known as “reheating”: a rapid turnaround that causes inflationary pressures to re-emerge. Is such a phenomenon possible?..

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