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Noah Smith

The Inflation Doomsayers Are Wrong Again

As the debate about stimulus spending rages, you can trust the government when it says inflation really is low.

Inflation is steady. Really.

Inflation is steady. Really.

Source: Bloomberg

Every so often, concerns crop up that inflation is much higher than official government numbers report. Sometimes people claim that rises in asset prices, or relative changes in living costs for some subgroups of Americans, represent hidden inflation. Others may cite an alternative inflation index that shows much higher price increases. But there's no reason to panic. Official government numbers do a good job of measuring the rate of inflation.

Inflation numbers are important because if inflation is actually running higher than the government numbers suggest, it means that either the Federal Reserve needs to raise interest rates or Congress needs to cut the deficit, or both. We're very likely to hear those arguments during the first few years of the Joe Biden administration — particularly as a reason to restrain spending. So here's some information to make better sense of the debate.