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Karl W. Smith

America Needs Higher, Longer-Lasting Inflation

The benefits of moderately rising prices and wages outweigh the costs.

Prices aren’t going bananas quite yet.

Prices aren’t going bananas quite yet.

Photographer: Scott Olson/Getty Images North America

The administration of President Joe Biden has repeatedly assured Americans that the sharp uptick in inflation they are experiencing is temporary — in the language of economists, transitory. Surveys suggest that public is less than convinced, but consumer expectations of inflation are notoriously fickle.

All of this has economists and central bankers dutifully poring over data for signs of when or whether inflation, currently just under 4%, will drift back toward the Federal Reserve’s target of 2%. Instead, they should be considering a more fundamental question: whether the Fed should strive to make 4% inflation permanent.