In economics, it always pays to mind your Ps and Qs: prices and quantities. In “Inflation and the Fog of War” (op-ed, April 15), Reuven Brenner focuses on prices. He cautions that, when it comes to measuring inflation, there can be slips between the cup and the lip, particularly during times of crisis, such as war and Covid lockdowns. He then makes the case that measured inflation, like the consumer-price index, should, in the postpandemic environment, be taken with a grain of salt. According to Mr. Brenner, yield-curve spreads and the value of the dollar would provide better price indicators of the stance of monetary policy.
What do Mr. Brenner’s preferred Ps, the yield curve and the value of the dollar, tell us? The yield curve has flattened and the dollar is strong, curiously indicating Fed tightness. But traditional Ps, like the CPI, price-sensitive commodity prices and the price of gold, are all up, signaling looseness.
Read More: To Read Inflation, Fed Must Mind Its Monetary Ps and Qs