The De-Anchoring That Didn’t Happen
Until very recently, there was lots of talk on Wall Street and among Federal Reserve officials of the danger of inflation expectations becoming “unanchored” due to tariff-induced price increases. In October, the Federal Reserve Bank of Boston published a paper warning that household inflation expectations had surged in ways that were “largely unexplained” by actual price movements, suggesting a dangerous similarity to the late 1970s when expectations became persistently elevated and fueled an inflationary spiral.
The fear was grounded in well-established economic theory. According to the dominant theory of…
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