June 21, 2021.Remember when everyone was panicking about inflation, warning ominously about 1970s-type stagflation? OK, many people are still saying such things, some because that's what they always say, some because that's what they say when there's a Democratic president, some because they're extrapolating from the big price increases that took place in the first five months of this year.

For those paying closer attention to the flow of new information, inflation panic is, you know, so last week.

Seriously, both recent data and recent statements from the Federal Reserve have, well, deflated the case for a sustained outbreak of inflation.

For that case has always depended on asserting that the Fed is either intellectually or morally deficient.

That is, to panic over inflation, you had to believe either that the Fed's model of how inflation works is all wrong or that the Fed would lack the political courage to cool off the economy if it were to become dangerously overheated.

Both beliefs have now lost most of whatever credibility they may have had.Let's start with the theory of inflation.

Since the 1970s, and especially since a seminal 1975 paper by Robert Gordon, many economists have tried to distinguish between transitory fluctuations in the inflation rate driven by temporary factors and an underlying "Core" inflation rate that is much more stable - but also hard to bring down if it gets uncomfortably high.

The idea is that policy should largely ignore transitory inflation, which is easy come, easy go, and worry only if core inflation looks as if it's getting too high.

Since 2004 the Fed has routinely published an estimate of core inflation that it derives by excluding changes in food and energy prices, which are notoriously volatile, and has used that measure to fend off demands that it tighten monetary policy in the face of inflation it considers temporary - notably in 2010-11, when prices of oil and other commodities were rising and Republicans were accusing the Fed of risking "Currency debasement."

The Fed was, of course, right: Inflation soon subsided.

The distinction between transitory and underlying inflation - a distinction that, judging from my inbox, generates an extraordinary amount of hatred from some Wall Street types - has been a huge practical success, helping the Fed to keep calm and carry on in the face of both inflation and deflation scares.

The Fed has been arguing that recent price rises are similarly transitory.

True, they're not coming from food and energy so much as from pandemic-related disruptions that caused surging prices of used cars, lumber and other nontraditional sources of inflation.

The Fed's view has been that this episode, like the inflation blip of 2010-11, will soon be over.

Prices of industrial metals like copper are coming down.

What about the alternative inflation story? It goes like this: The Biden administration's American Rescue Plan has pumped a huge amount of purchasing power into the economy, while affluent households, which built up large savings during the pandemic, are now ready to go on a spending spree.

As a result, critics warn, there will be a classic case of too much money chasing too few goods, leading to a big rise not just in volatile prices but in underlying inflation, too.

To buy into this story you have to claim not just that the coming boom will be truly huge - even bigger than most private forecasters expect - but also that the Fed, which is fully capable of reining in a runaway boom, will stand idly by while inflation gets out of hand.

Last week statements from the Fed's open market committee - the group that sets monetary policy - made such claims less plausible.

Reading such statements is often an exercise in Kremlinology - the Fed didn't announce any actual policy changes, so it's all about trying to identify changes in tone that give clues about the future.

Fed watchers considered the new releases hawkish, signaling increased willingness to step on the brakes if the economy really is exceeding its speed limit.

By suggesting that it will act if necessary, the Fed has largely undercut whatever case there was for worrying about a return to the 1970s.

So what was all that about? Monetary doomsayers have been wrong again and again since the early 1980s, when Milton Friedman kept predicting an inflation resurgence that never arrived.

Why the eagerness to party like it's 1979?To be fair, government support for the economy is much stronger now than it was during the Obama years, so it makes more sense to worry about inflation this time around.

The vehemence of the inflation rhetoric has been wildly disproportionate to the actual risks - and those risks now seem even smaller than they did a few weeks ago.