Fall in inflation challenges assumptions on what drives price hikes

Inflation has fallen sharply and is now at the Fed's 2% target based on recent data. Disinflation or even deflation may be looming.

Consumer spending accelerated over the past year even as inflation declined, contradicting theories that excess demand drives inflation.

Unemployment has remained low and steady while inflation dropped, contradicting the idea that tight labor markets and wage pressure cause inflation.

Producer prices and money supply figures point to mounting risks of deflation ahead.

Mainstream inflation models have been inaccurate. We may need to rethink assumptions linking inflation to high employment and consumer demand.