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Allison Schrager: Inflation Stands to Test Many Americans

Many Americans are facing high and variable inflation for the first time in their lives. The question is how long it will last? Stable and low inflation has been a gift for central bankers since the 1980s. It gave them room to be more expansionary. But if inflation expectations change it means monetary policy has to be more aggressive to curb inflation. According to survey data from the New York Fed, three years ahead most Americans expect higher inflation. Older Americans, who have more experience with inflation, expect it to stick around and be nearly 4%. Younger Americans expect it to settle down to 3%. Even 3% inflation would be a much higher rate than we've been accustomed to. It would also potentially mean higher interest rates that could disrupt financial markets.

Source: The Federal Reserve Bank of New York

Allison Schrager is a senior fellow at the Manhattan Institute. Follow her on Twitter here.

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Posted: February 23, 2022 Wednesday 11:45 AM