Charles W. Eliot University Professor and President Emeritus at Harvard University


My inflation warnings have spurred questions. Here are my answers.

June 5th, 2022

I have argued repeatedly that Federal Reserve policy remains dangerously behind the curve in ways that will lead to poor economic performance in the years ahead, and that a rapid change in direction is needed. This view has been challenged from both outside the Fed and within it, including in Fed Chair Jerome H. Powell’s most recent speech. Here, let me respond to the main challenges to my analysis.

First, the question isn’t whether inflation will come down from about 8 percent on the current policy path. It is whether it will come down to an acceptable level. That’s a very different proposition.

Second, given new bottlenecks associated with the Ukraine war, covid-19 closures in China and rising worker restiveness, it is far from clear that new supply-chain developments will be positive. Team Transitory proved dead wrong through 2021. It may well be wrong in 2022.

Third, the optimists have their macroeconomics wrong. True, more job seekers might restrain wages. But more workers earning and spending raise demand and prices. Only if they add slack to the labor market — raising unemployment, in other words — will extra labor-force participants reduce inflationary pressure. Similar logic applies in product markets. If used-car or gasoline prices come down, consumers will have more to spend on other goods, pushing up their prices.  READ THE FULL WASHINGTON POST COLUMN