Gold Core

Inflation or deflation?

Published by Marc Westlake under Economics |

Does Monetary Expansion Stoke Inflation?

Since the financial crisis hit in late 2008, the US monetary base has more than doubled, from about $800 billion in mid-2008 to about $2 trillion in November 2010. When the Federal Reserve announced a second round of quantitative easing (QE2), it raised investor concerns that such actions would stoke inflation.

While inflation has fluctuated considerably, it has not tracked the changes in the monetary base. Although no one can reliably forecast inflation, we think markets do a pretty good job of sorting through all the macroeconomic data. At present, the markets do not appear to reflect expectations of runaway inflation in the near future.

We have recently updated our research on Inflation and this can be found here: 

US Monetary Policy since 2000

Source: Federal Reserve Board