The Washington Post should keep that in mind when it reports on inflation. An article on the 1.2 percent jump in producer prices reported for July included a quote from a strategist at J.P. Morgan Private Bank claiming that a slowdown is needed to keep inflation in check. It is not clear that slower growth is the best remedy for inflation at the moment. The main causes of higher inflation are rising world commodity prices, due to increased demand from China and other developing countries, and higher import prices due to the fall in the dollar. It is not obvious that an economic slowdown in the United States will do much to counter either factor. Even if demand falls off in the United States, increased demand elsewhere in the world will continue to put upward pressure on the price of oil and other commodities. The falling dollar is a correction from its prior over-valuation which led to the country's massive trade deficit. An economic slowdown will not reverse the dollar's decline. It would have been helpful if this article included the views of an expert who did not work for a bank, who could have presented these arguments to readers.
--Dean Baker
