Inflation: Missing in action?

09/4/2013

Donald A. Norman, Ph.D., senior economist
The Fed appears to be between a rock and a hard place. At some point, the Fed will have to reverse course and taper its quantitative easing and start selling some of the securities it has amassed. If it does not reduce the monetary base in a timely fashion when economic growth picks up, the money supply will grow rapidly, likely leading to higher inflation rates. Those opposed to tapering in the current economic environment point out that inflation is not on the immediate horizon and tapering now would rein in the economy before a robust expansion is underway. Issues in Brief

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