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Inflation as Nonevent: Narrative Only the Fed and Wall St. Could Spin

The Wall Street Journal  ( Original )
MAR 2, 2018

Are there still those out there who believe the soothsaying that while inflation is on the way, it’s going to be benign, a footnote, so minor we won’t even notice it’s here?

Inflation is going to head up this year—on that there isn’t much debate. The real debate is over whether it will be a nonevent or something more ominous.

The Federal Reserve and most of Wall Street think it will be a nonevent. But there is a plausible scenario in which it marks a new, dangerous trend. Even if you think it unlikely, you need to give this scenario serious thought because trillions of dollars of investments are geared to inflation being dead.

A mix of economic forces—including historically low unemployment, tax cuts, a falling dollar, higher oil prices and protectionist measures—could quickly and unexpectedly ramp inflation, turning what’s supposed to be a nonevent into something more ominous.

Inflation doesn’t have to get too far out of whack to wreak havoc: A world in which inflation risks persistently point up instead of down would drive bond yields higher and kick the support out from under stock and property values.

ORIGINAL SOURCE: Why an Unpleasant Inflation Surprise Could Be Coming by Greg Ip at The Wall Street Journal on 2/28/18