Does Strong Growth Fuel Inflation? Fed Debates Whether Old Model Still Applies.

Federal Reserve officials are debating whether the traditional models they use to forecast inflation are still applicable. Despite strong economic growth and a tightening labor market, inflation has been slowing. Some officials argue that the conventional model should not be used at this time, as supply potential is rising and demand is stabilizing. Others are concerned about continuing to forecast a decline in inflation that may not materialize. The performance of the labor market will be crucial in settling the debate. [Extracted from the article]