On Wednesday, Nobel Prize-winning economist Paul Krugman provided a brief analysis of the current economic landscape in the United States. Krugman asserted that the nation has experienced “remarkable disinflation.” According to him, the available data paints a compelling picture, suggesting that the “war on inflation has been pretty much won — without a recession.” Krugman emphasized that inflation turned out “to be transitory,” contrary to initial apprehensions.

Krugman Declares Victory — ‘Inflation Turns Out to Have Been Transitory After All’

On Wednesday, the U.S. Bureau of Labor Statistics (BLS) unveiled its eagerly anticipated Consumer Price Index (CPI) report, shedding light on the nation’s current inflation rate. The report revealed a notable surge in the CPI for all urban consumers, marking a 0.6% increase in August when adjusted for seasonal variations. This significant uptick followed a 0.2% rise in July, making it the most substantial month-to-month price escalation witnessed in well over a year.

The development has prompted market analysts to lean towards the expectation that the U.S. Federal Reserve will opt for a federal funds rate increase during their upcoming meeting. In the wake of the report from the BLS, Paul Krugman felt compelled to weigh in, offering his insights on what he saw as “bad takes on CPI out there.” Krugman emphatically stated that, if we exclude “volatile components, we’ve seen remarkable disinflation.”

In stark contrast to the prevailing sentiment among most Americans, the economist painted a considerably brighter economic picture. Krugman said:

Bear in mind that core is still being distorted by lags in the measured price of shelter. So basically the data are now saying that the war on inflation has been pretty much won — without a recession. We could still have a recession. But it will be a policy error, not something we needed to control inflation that turns out to have been transitory after all.

When Krugman voiced his perspective on the social media platform X, it was met with a fair share of skepticism from the online community. One individual, adopting a sarcastic tone, responded by saying, “Transitory … After one of the most dramatic tightenings in living memory.”

Economist Robert Murphy also joined the conversation, offering his viewpoint, which underscored the fact that the Fed had taken actions contrary to Krugman’s recommendations. Krugman’s viewpoints have long been the subject of critique, with his recent statements only adding fuel to the fire. Some reports have argued that his self-assured responses to his own queries frequently fall wide of the mark.

Notably, in 2021, he faced backlash for his assessments of the efficacy of the substantial economic stimulus measures implemented in the wake of the Covid-19 pandemic. While Krugman has humbly conceded his misjudgment regarding the relevance of the internet, his unshakable belief in the correctness of his convictions often leads him to boldly address the public.

What do you think about Krugman’s opinion about inflation? Share your thoughts and opinions about this subject in the comments section below.