Top Economists Answer: Whatever Happened to Inflation?

Since 2008, the Federal Reserve has been trying
to stave off economic disaster with an unconventional monetary
policy tool known as quantitative easing. By buying financial
assets from commercial banks and other institutions, the Fed has
massively expanded the money supply–quadrupling it since the
practice began.

Many economists, particularly followers of the Austrian school,
deplored the practice and predicted that the unprecedented currency
and asset price manipulation would lead to huge and damaging price
inflation. Reason was among them, declaring on our October
2009 cover: “Inflation Returns!”

Six years later, official consumer price index inflation sits at
just 2 percent annually from July 2013 to July 2014, the latest
period for which figures are available. This is identical to the
rate for the previous year. We asked four economists and market
analysts to revisit what they originally predicted would happen
after quantitative easing and assess whether (and why) they were
right.

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