According to Woody Brock, inflation will not fall back to the pre-COVID 2% level that the Fed wants. Two underlying structural changes will keep inflation at about 4.
- The long-overdue rise in the cost of labor; and,
- A permanent doubling of the size of the U.S. fiscal deficit as a percentage of GDP. But the news is not all bad. The IT-based technology revolution is continuing, and as he has argued for at least 10 years, this revolution has been the most important reason why inflation has been dropping for decades – a story completely ignored by the Fed in the 1980-2020 period. Brock expects the technology story to continue to be disinflationary. Just consider the disinflationary impact of Zooming.
Watch the interview here.
