An Economist’s Winding Path to an Inflation Reality Check

Alan Blinder goes from ‘Team Transitory’ to ‘wish the Fed luck.’

Letter to WSJ. 

"Alan S. Blinder has had an epiphany (“Wish the Fed Luck as It Seeks a Soft Landing on Inflation,” op-ed, April 7). Just two months ago, Mr. Blinder, a self-acknowledged member of “Team Transitory,” implored the Federal Reserve to raise interest rates “gently.” He now says that at the time he believed that the Fed had “a fighting chance—probably below 50%” of controlling inflation. If the problem was that bad, why did he want the Fed to “wait to see how things unfold”?

Two months ago, he also said the Fed was behind the curve in ending its bond buying. Now he says the Fed’s only tool is to raise interest rates. Apparently he is not concerned that M2 is at an eye-popping $21.8 trillion; there is enough liquidity in the economy to keep the fires burning should inflation expectations ramp up.

Mr. Blinder takes solace that the 10-year break-even inflation rate is only 2.8%. But that measure is a terrible indicator of future inflation, which is notoriously difficult to predict. One would think that a member of Team Transitory from only two months ago would be more reticent in predicting where inflation is heading.

Dan Thornton

Des Peres, Mo.

Mr. Thornton was vice president of the Federal Reserve Bank of St. Louis."