They believe the forces of unprecedented competition, technological advances, organizational innovations, and rising productivity will conspire to keep the inflation dragon contained throughout the economic expansion. If so, the Fed will stay the course. But there is another possible outcome that isn't being discussed - that the Fed will cut interest rates when it finally stirs. That's right - the Fed will lower, not hike interest rates. The reason is that interest rates are currently high relative to the nation's rate of price increases.
Inflation continues to decelerate during the current economic expansion.
Producer prices are flat to down. Currently, consumer inflation is just about absent after taking into account the contention of many economists that the widely followed price index overstates inflation by about half a percentage point. No, the powerful forces that have driven the trend toward lower inflation rates, or disinflation, since the early 1980s have gathered enough momentum that lower prices, or deflation, are actually showing up in more places in the economy during the 1990s.