by David C. Rose
The American Institute for Economic Research
The inflation outlook has improved, but it is still very much in the news. Although the rate of increase has slowed, prices remain more than 20 percent above what they were four years ago. At the same time, most analysts understand that the slow and at times negative growth of the money supply, which has tamed inflation somewhat for now, cannot be sustained.
Now that the Fed has announced its 50-basis-point cut in the federal funds rate, it will be opening the money spigot again. To be fair, the increase in the rate of growth of the money supply needed to achieve this reduction in the federal funds rate is modest. But as the Fed continues to reduce rates, the rate of money growth will increase, and so the likelihood of future inflation will rise. Since the Fed has given every indication that many more rate cuts are coming, what either presidential candidate has to say about inflation has never been more important.