Paul Krugman Thinks 'Soft Landing Is Looking Increasingly Plausible' After Inflation Cools Down

Nobel laureate and noted economist Paul Krugman has expressed optimism over the latest inflation report, saying that a soft landing looks increasingly plausible.

“A good inflation report — core inflation for October only 3.6% annualized. Monthly data are volatile; still 6% over the past 3 months. But shelter accounts for more than half of that — and it's a lagging indicator,” Krugman tweeted.

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Numbers Speak: The headline consumer price inflation for October came in at 7.7%, versus 8.2% in September, lower than analyst estimates of 8%. As a result, the Dow Jones Industrial Average rose over 1,200 points on Thursday in its biggest one-day rally in over two years, while the Nasdaq Composite closed 7% higher. The SPDR S&P 500 ETF Trust SPY ended Thursday’s session over 5% higher while the Vanguard Total Bond Market Index Fund ETF BND gained over 2%.

Rental Rate: Krugman pointed out that there is overwhelming evidence that growth in new tenant rental rates has slowed dramatically and maybe even gone negative. “This will feed into BLS shelter index with a lag. Between this report and the wage numbers, good reason to believe underlying inflation coming under control,” he said.

The economist had earlier questioned the belief that bringing down inflation requires a recession. “But won't bringing inflation down require a nasty recession? Maybe, or maybe not — that's an assertion, not a fact. And the standard economic model of stagflation, which depends on expectations, actually says not, since expected inflation hasn't risen much,” he had said in an earlier series of tweets.

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