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Economists Share Predictions at Cleveland Federal Reserve Bank Conference on Inflation

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Cleveland’s Federal Reserve Bank has wrapped up a two-day conference on inflation. ideastream’s Joanna Richards reports on some of the discussion about this vital facet of the economy.

Friday, May 30, 2014 at 5:32 pm

Academics, policymakers, and representatives of Northeast Ohio’s business community shared information, and debated strategies for measuring and predicting inflation.

Inflation – the overall change in the price of goods and services – is important. It affects a range of economic activity, from whether consumers can afford to finance a home, to what kind of profit a company makes when it turns raw materials into consumer goods.

The Fed uses monetary policy to try to keep inflation at 2 percent – not too low, not too high. During the recovery from the recession, it’s been rising, and right now, it’s just under that 2 percent goal.

Mark Zandi is chief economist for Moody’s Analytics and a frequent diviner of economic trends in the press. He believes rising housing demand will push inflation up over the next couple of years, but this will help stimulate economic growth. Zandi added many college graduates who moved back in with parents when they couldn’t find jobs are now moving out, as their employment prospects brighten – "which I can attest to personally," he said. "My son just got a job after a long search. Roughly two hours after he got the job, he found an apartment – a household formed."

Zandi argued this bodes well for the economy, since rising housing demand will create jobs, and raise the value of people’s homes, boosting their confidence and possibly their spending habits.

Zandi predicted inflation will hit 3 percent by 2017, then come down a bit and stabilize.