So this is about the now getting to be passe topic of what will happen to inflation this year, with Larry Summers having gone out of his way to make a lot of noise in criticizing the expansionary fiscal policy partly passed but partly still under consideration in Congress as threatening a possible outbreak of 60s-70s style inflation at an entrenched much higher rate than we are seeing now. He has put the probability of that at about a third, but considers this to be high enough to call for the Biden fiscal policy to be cut back in order to avoid that one third chance of a serious increase in the rate of entrenched inflation.
This forecast has not been accepted by the leading economic policymakers, notably Treasury Secretary Janet Yellen and Fed Chair Jerome Powell, as well as the various lesser lights at the CEA and elsewhere in the Biden administration. Their official line is that it looks like we shall see an increase in the rate of inflation, and the latest monthly report does have it over 2 percent now, but with this likely to come back down later in the year or by early next year. This is seen to be due to much of the uptick aggravated by supply issues related to pandemic, especially in global shipping, although also with some specific sectors hitting bottlenecks, with all this crashing against rising demand with GDP growth projected at over 6 percent for the year. But they see the supply issues becoming resolved with the fading of the pandemic and there not being mechanisms in place to entrench the higher rate of inflation, with those at the Fed even hoping that inflation expectations might end up “centered around the 2 percent target rate,” which the Fed has not been able to get to on a sustained basis.