Inflation's Resurgence: A Surprising Victory for the Economy

Nominal gross domestic product (NGDP) growth, a key economic indicator, is signaling that inflation is not under control and that the Federal Reserve's monetary policy is too loose. NGDP grew at a rapid rate of nearly 9% in the third quarter, the fastest in 20 years. This contradicts other signs of receding inflation, such as falling inflation rates, decreasing inflation expectations, moderating wage growth, declining job openings, and the expectation of a future interest rate cut by the Fed. Experts argue that the strong NGDP growth should prompt the Fed to tighten monetary policy, but there are also factors that could moderate or mismeasure the signal. Nonetheless, NGDP growth remains an important metric to monitor for a better understanding of the economy's heat.