Consumer price inflation was surprisingly high last month, coming in at a worrying 0.4%. The headline figure was driven by rising oil prices, to be sure--we hit $100 a barrel yesterday--but now core inflation, at 0.3%, is keeping a close tail on the headline number. Whether this represents the long-awaited trickling through of higher oil prices into other sectors, or excessive liquidity from the Fed, one can be sure that the central bankers are worried. For the first time in a long time, the central bankers may really have to choose between recession and dangerously accelerating inflation.
When I interviewed him last month, Austan Goolsbee pointed out that after Greenspan stepped down, and Bernanke was tapped for the chair, you saw a lot of monetary economists on our nation's more famous campuses who were clearly thinking "Why wasn't it me, God?" Now they're more likely to be thinking "Thank God it wasn't me." This is the time when central bankers start feeling, in the immortal words of Tom Lehrer, "about like a Christian Scientist . . . with appendicities."