Why Biden should talk up economic success

THE United States economy has just gone through an extraordinarily successful year. Many economists (although not all of us) predicted that getting inflation under control would require a recession and an extended period of high unemployment. Instead, inflation has plunged – over the past six months the Federal Reserve’s preferred measure of underlying inflation has been running slightly below the target rate of 2 per cent – even as the economy has boomed, with real gross domestic product rising 3.1 per cent and employment rising by 2.9 million.

In case you’re wondering, Tuesday’s (Feb 13) somewhat hot inflation report doesn’t change the story much. You never want to read too much into one month’s data, especially for January, which is often erratic. As Goldman Sachs noted in advance in a newsletter, the bank expects “a temporary boost” to the core consumer price index “from start-of-year price increases, which we expect to be most pronounced in the prescription drugs, car insurance, tobacco, and medical services categories”.

Fundamentally, the economic picture remains very good.