A recession won’t be as scary as it sounds

Allison Schrager

INFLATION like this can’t last forever. How it will end is now the more salient question. Often it takes a recession to break inflation. Economist Lawrence Summers observed that this has been the case every other time inflation was this high and the labour market was this tight.

Then again, we’ve never before experienced inflation that was caused by shutting off the economy. So maybe this time will be different. There is hope that with some artfully calibrated rate increases and some very, very good messaging, the Federal Reserve can bring inflation down and avoid a recession. The Fed could increase rates just enough to keep inflation from getting worse, and then supply-chain and other post-pandemic pressures will recede, and excess inflation will disappear. There already are signs that inflation is moderating.