Commentary
U.S. inflation is coming down, but there are various reasons for this. Market analysts tend to follow the majority of views that the overall number is lowered by energy-related items. Official academics like those working for the Fed tend to find evidence for supply-side arguments. They employ the old structural equation models to decompose the shocks into demand versus supply and conclude. Yet this approach has been criticized since the 1970s (the previous inflationary episode) for missing an important element of monetary policy expectations.
