James Bullard, Interview: by Minneapolis Fed

Do you think we, as a general public, have lost our sensitivity to the fact that inflation imposes a cost because we have had decades with such consistently low inflation in the United States?

“Yes. My story about what happened is that there’s a heck of a lot of inflation in the ’70s. In that era, there was high and volatile inflation, and the surprise was that you didn’t only get inflation. You also got volatility in the real side of the economy: four recessions in about 13 years between the late ’60s and the early ’80s.”

“Then after that, inflation stabilized and we kind of took a different approach to inflation: Let’s keep it low and stable. Along with lower and more stable inflation, we got very long expansions in the 1980s and 1990s, recently before the pandemic and, to some extent, even during the 2000s. I think that convinced everybody that you’re better off with low and stable inflation.”

“Basically, every time you raise inflation, you’re changing capital taxation in the economy.”

“Now low and stable inflation has been going on for such a long time that maybe people have forgotten a little bit, although there are always examples around the world. Turkey is an example today, and Venezuela recently. You can always point to somewhere in the world where this process has gotten dramatically out of control and it’s not good for the citizens living in those societies.”