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Cyclical Forces on Inflation and Deflation
The 1970s experience of stagflation not only revealed that weak economic growth does not automatically translate to low inflation, but also led our research group to determine that that inflation moves in cycles distinct in timing from those in economic growth. Since then, ECRI has developed leading indexes to anticipate inflation cycle peaks and troughs for ten economies around the globe.
Given the apparent crosscurrents in economic data today, many see either inflation or deflation as a serious threat to the U.S. economy. With decades of research on inflation cycles informing our analysis, ECRI’s latest study delves into the cyclical relationship between our U.S. Future Inflation Gauge (USFIG), which was designed to lead turning points in the U.S. inflation cycle, and inflation expectations, which it also happens to lead. Inflation expectations have popped recently, in the wake of QE3 and an uptick in the Weekly USFIG. As a result, the USFIG helps cut through the murk of this unusual economic cycle characterized by unprecedented policy actions.