Why US Inflation Is Headed Down

Despite August’s disappointing inflation numbers, the US economy is uniquely equipped to mitigate and overcome the current price surge, owing to its relative energy and food independence, abundance of immigrant labor, strong production capacity, and the capital needed to boost domestic manufacturing.

US inflation remained stubbornly high in August, with prices increasing at an annual rate of 8.3%. While this higher-than-expected increase has disappointed some economists, US Federal Reserve Chair Jerome Powell’s commitment to raising interest rates – which he emphasized in his recent Jackson Hole speech – will surely dent US inflation by squeezing demand. And the prospect of imminent monetary tightening has helped to strengthen the dollar, which has breached parity with the euro and reached a 20-year high against the yen, easing import-led inflation.

To read more from Project Syndicate, click here.

© Project Syndicate

Read more commentaries by Project Syndicate