Former Federal Reserve Chairman Alan Greenspan is forecasting a long over-due inflation uptick.
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“I think we are on the edge now of a significant change in the global outlook. And it’s a very slow and very turgent but very persistent move from deflation to inflation. We’re seeing the very early signs of a process of inflation rising,” Greenspan told the FOX Business Network’s Maria Bartiromo.
One of the data points Greenspan is tracking is the growth of money supply, which in just the last six to eight weeks has seen a noticeable pick-up, he said.
Low inflation has been a thorn in the side of the Federal Reserve for many months running under 2%.
While inflation helps promote employment among other things, Greenspan also warned it cannot rise too far, too fast.
“What I’m talking about is not a return to some stability in practice. I think yes, if we’re starting to move on the price inflation area which remember, we have not yet seen and it’s still latent in the data. But when that starts, the presumption that it’s going to stabilize at some moderate rate is I think foolish. History tells us that we will get out of the deflation area but we will be in nirvana sort of speak for a very short period of time as we move into a fear of inflation.”
Greenspan’s comments coincided with the U.S. Labor Department’s producer price index which rose 0.5 percent in June, the largest increase since May of 2015.
Like Greenspan, Fed Chair Janet Yellen is also predicting the tide with turn. During her June press conference noting:
“As the transitory influences holding down inflation fade, and as the labor market strengthens further, the Committee expects inflation to rise to 2 percent over the next two to three years.”