Good Analogy

Here’s what a CBSMarketwatch article about this week’s upcoming CPI release said regarding the potential danger for inflation that it may or may not show:

WASHINGTON (CBS.MW) — Imagine coming across an apartment building where half of the residents are shouting fire and throwing their possessions from their windows and the other half are calmly sitting on the front stoop, chatting, and drinking cans of beer wrapped in paper bags.

Such a dichotomous view is what emerges when you talk to Wall Street economists about inflation. Many economists are certain that higher inflation is a foregone conclusion, while others dismiss the concern. Who is right?

Myself, I was in the camp of those worried about deflation for much of last year. But in the last few months I’ve stopped worrying about deflation. However, this doesn’t mean that I agree with those who are already worrying about inflation. I think there’s enough slackness in the economy that it will still be several months before we see the inflation rate creep up. On Wednesday (when the March CPI figures are released) we’ll have a tiny bit more information to see who’s right.