Inflation: a revolution of falling expectations

Paul Krugman

Published Wed, Jul 20, 2022 · 01:00 PM

MACROECONOMIC policy in the United States has been subject to 2 great errors over the past half-century. The odds are that you’ve only heard about the first: the way the Federal Reserve allowed inflation to become entrenched in the 1970s. But the second — the way policymakers allowed the economy to operate far below capacity, needlessly sacrificing millions of potential jobs, for a decade following the financial crisis — was arguably even more severe.

The task facing today’s policymakers, which, given Joe Manchin — er, gridlock in Congress — effectively means the Fed, is to try to steer a course between Scylla and Charybdis, avoiding…