Despite progress on shelter inflation, core services excluding shelter (the "super core") remain sticky. This persistence, linked to wage components, is a primary reason the Federal Reserve will likely pursue a gradual pace of interest rate cuts rather than a more aggressive easing policy.

Despite recent inflation nearing double digits, market expectations for inflation five years out remained stable at the Fed's 2% target. Austan Goolsbee argues this was only possible due to the Fed's credibility, which prevented a dangerous spiral where people's actions make high inflation a self-fulfilling prophecy.

Goolsbee argues the Fed’s aggressive rate hikes deserve credit for enabling recent disinflation. By acting decisively, the Fed kept long-term inflation expectations anchored (as seen in TIPS data), preventing a wage-price spiral and allowing supply-side healing to bring inflation down without a major recession.

Be wary of economic propaganda that highlights nominal wage gains. By strategically ignoring inflation, politicians can spin a positive story while the real purchasing power of workers declines. Understanding the difference between nominal and real figures is crucial for assessing economic health.

Contrary to narratives about excess demand, the recent inflationary period was primarily driven by supply-side shocks from COVID-related disruptions. Evidence, such as the New York Fed's supply disruption index accurately predicting inflation's trajectory, supports this view over a purely demand-driven explanation.

While current events may push the economy in a stagflationary direction (higher prices, slower growth), it's crucial to distinguish this from actual stagflation. Goolsbee notes that the 1970s saw unemployment and inflation rates both near or above 10%, a scenario far more severe than today's challenges.

Workers' real wages are declining as nominal wage growth slows despite strong productivity and high inflation. This combination defies the economic logic of a tight labor market and suggests significant hidden slack and weak worker bargaining power.

Investors often rush to price in the disinflationary outcome of an oil shock (demand destruction). However, the causal chain is fixed: prices rise first, hitting real spending. Only much later does this weaken the labor market enough to reduce overall inflation, a process that can take 9-12 months to play out.

Official inflation metrics may be low, but public perception remains negative because wages haven't kept pace with the *cumulative* price increases since the pandemic. Consumers feel a "permanent price increase" on essential goods like groceries, making them feel poorer even if the rate of new inflation has slowed.