Transitory Inflation Does Not Mean Transitory Price and Wage Increases- by NEIL SISKIND

“Transitory” does not mean we will have prices that decline at some point. Higher prices can stick “and” the inflation can be transitory.

If prices rise- “once”- due to post pandemic factors such as pent up business and consumer demand and supply constraints, and those prices “stick” as they get passed on to consumers, it does not mean that we have structural or persistent inflation. It also does not mean that the higher prices are transitory.

The higher prices could persist, and we have to live with them, and they could cause higher wages. But this does not mean we will have year on year inflation again in a subsequent year. A round of higher prices and a round of higher wages could be the end of it. Prices could stabilize from there.

So, the higher prices may not be transitory- they may be permanent- but the rise in inflation can still be a transient phenomenon that does not repeat in the future. People keep wondering if these higher prices- like in lumber and food- will alleviate, noting that there must be inflation. Sure, there is inflation. And it could be permanent. Even if the prices don’t reverse, it can still be transitory inflation. The Fed would still be right.

Annual inflation rates and one-time price increases are different concepts. If offshoring continues, and if commodity and supply meets demand, that’s an equilibrium. Prices need not decline or rise from there.

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