Paul Krugman vs. Larry Summers: Here’s How the Validation of the Former’s Inflation Theory Will Impact Future Public Policy in America.

America has managed to curb inflation without damaging the economic situation. The risk of recession is receding.

At the end of each month in America, the US Bureau of Labor Statistics publishes its statistics on inflation measured in America the previous month. This is the famous Consumer Price Index with which the general public is familiar. However, the Fed prefers to rely on another indicator when making its monetary policy decisions: the PCE Price Index.

The latest release of the PCE Price Index for December 2023 gave a figure of 2.597%.

If this figure did not prompt the Fed to accelerate its monetary policy agenda for the months ahead, it did at least have the merit of enabling an important conclusion to be drawn on two major theories that were in conflict during 2021.