CBO making the argument that inflation will have been transitory after all

The Congressional Budget Office joins Team Transitory, projects inflation comes down without a recession https://t.co/e4UKT4I5rQ

— Dean Baker (@DeanBaker13) May 26, 2022

helltopay1 said:

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The CBO has just projected the US to have the largest sustained deficit since 1930!!!!!!!Darn....I knew I should have voted for Biden....

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Tax cuts plus failing to even attempt to slow down the pandemic for fear of it impacting Trump's chances in the 2020 election really screwed us. I don't recall you complaining about those things, I wonder why.

It's overall a pretty rosy outlook on the economy. We should be so lucky for this to come true. The below quote is from the CBO's report which we know you haven't even bothered to look up and probably wasn't highlighted in the agitprop conservative media that you consume which is designed to stoke fear in uninformed people.

Quote:

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The Economy. In CBO's projections, elevated inflation initially persists in 2022 because of the
combination of strong demand and restrained supply in the markets for goods, services, and
labor. Inflation then subsides as supply disruptions dissipate, energy prices decline, and less
accommodative monetary policy takes hold. Since mid-2021, inflation has reached its fastest pace
in four decades. In CBO's projections, the price index for personal consumption expenditures
increases by 4.0 percent in 2022. In response, the Federal Reserve tightens monetary policy and
interest rates rise rapidly. Real GDP grows by 3.1 percent in 2022, and the unemployment rate
averages 3.8 percent. After 2022, economic growth slows, and inflationary pressures ease (see
Chapter 2).

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Unit2Sucks said:

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helltopay1 said:

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The CBO has just projected the US to have the largest sustained deficit since 1930!!!!!!!Darn....I knew I should have voted for Biden....

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Tax cuts plus failing to even attempt to slow down the pandemic for fear of it impacting Trump's chances in the 2020 election really screwed us. I don't recall you complaining about those things, I wonder why.

It's overall a pretty rosy outlook on the economy. We should be so lucky for this to come true. The below quote is from the CBO's report which we know you haven't even bothered to look up and probably wasn't highlighted in the agitprop conservative media that you consume which is designed to stoke fear in uninformed people.

Quote:

---

The Economy. In CBO's projections, elevated inflation initially persists in 2022 because of the
combination of strong demand and restrained supply in the markets for goods, services, and
labor. Inflation then subsides as supply disruptions dissipate, energy prices decline, and less
accommodative monetary policy takes hold. Since mid-2021, inflation has reached its fastest pace
in four decades. In CBO's projections, the price index for personal consumption expenditures
increases by 4.0 percent in 2022. In response, the Federal Reserve tightens monetary policy and
interest rates rise rapidly. Real GDP grows by 3.1 percent in 2022, and the unemployment rate
averages 3.8 percent. After 2022, economic growth slows, and inflationary pressures ease (see
Chapter 2).

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It's weird to me how organizations like the CBO will readily speak to monetary policy but ignore fiscal policy, almost like even acknowledging fiscal policy is an admission of the effectiveness of Keynes. An admission of the effectiveness of Keynes is basically admitting liberals are correct on economics. The biggest reason why inflation and growth and jobs zoomed up was expansionary fiscal policy. The biggest reason why inflation is likely to decrease in 2022 is the withdrawal of that expansionary fiscal policy.

If March does end up being the peak of inflation (as the CBO is predicting), we should remember that monetary policy was still expansionary at that time. QE was still in progress (the Fed balance sheet may have peaked on April 13th) and the Fed Funds rate was only 0.25% - 0.50%. As we sit here today, the Fed balance sheet is neutral and the Fed Funds rate is still accommodative at 0.75% - 1.0%. We'll have to wait and see if March ends up being the inflation peak and inflation ends up being transitory as the CBO is predicting. Their assessment of the monetary policy impact of their own prediction is overstated relative to the impact of fiscal policy.

okaydo said:

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That this is the subject that htp has decided to post on after 10 days off just goes to show how embarrassed he is by the current GOP.

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I'm glad he did. I was unaware of this very good news report from the CBO until he posted.

GDPNow currently at 1.9% for Q2