We’re Getting the Wrong Kind of Inflation

Modestly higher prices aren’t pushing businesses to invest more

by Rex Nutting
Market Watch

We’re getting just a little bit more inflation, with the consumer price index rising 1.5% in the 12 months ending in September, the fastest increase in two years. This should be welcome news to the Federal Reserve (which wants 2% inflation), but, in many cases, we’re getting the wrong kind of inflation.

What’s the right kind of inflation? The kind that comes from increased confidence by both consumers and businesses that the economy is getting stronger. The kind that comes from higher wages pushing prices higher. The kind that induces companies to invest to meet rising demand.

In short, the kind that greases the wheels for better growth and higher productivity.

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