Easy money is another inflation-boosting factor that is losing its punch. It's true that the Fed slashed rates by a quarter point three times in late 1998 to cope with the global financial crisis. That stoked growth and inflation. But the Fed has taken back those cuts and more. The easy money connected with the Y2K software crisis is gone as well.
Some economists blame the surge for the economy's overheating in the first quarter.
But the Fed learned something from its experience in 1987, when liquidity that it added after the stock market crash led to inflation. Still, inflation hawks point to a range of indicators that inflation is getting out of hand. Indeed, with the tightest job market in 30 years, first-quarter labor costs for U.S. businesses climbed at their fastest pace in more than 10 years. And despite Cohen's calming words, inflationary psychology may be creeping back. Technology is far more of a force for price stability than it ever has been.