furman11_Liu JieXinhua via Getty Images_gasprices Liu Jie/Xinhua via Getty Images

Why Is US Inflation Falling?

However one does the analysis, the result is the same: the decline in inflation over the past year was largely the predictable (and predicted) consequence of the removal of temporary sources of inflationary pressure. Standard economic models appear to work, after all.

CAMBRIDGE – In just one year, inflation in the United States has fallen from a peak of about 9% to just 3%. Standard economic models suggest that such rapid disinflation would be possible only with a large increase in unemployment. But the unemployment rate has remained steady, at around its 50-year low, for the entire period. Do economists need to throw out our models and start over?