The Economics of Stagflation, Part III, by Paul Krugman, 31-08-2025

Stagflation policy dilemmas and why Fed independence is critical

Item: On Aug. 28 Chris Waller, a member of the Federal Reserve’s Board of Governors — and rumored to be in the running for the Fed’s next chair — gave a speech warning about economic weakness:

Returning to the labor market, risks are continuing to build. In my July 17 speech, I said that private-sector job creation was nearing stall speed, and the data received since then have put an exclamation point on this statement.

Clearly, it’s time to cut interest rates, to get ahead of the looming slowdown!

Item: On the same day, the Wall Street Journal reported strong indications that inflation is about to accelerate:

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