The Federal Reserve, which celebrates its 100th anniversary this year, is tasked by Congress with managing the money supply so as to preserve price stability while maximizing employment. But with the central bank having increased the money supply by 25% since the financial crash of 2008—while the federal government has borrowed $5 trillion—can inflation be far off?
Low and stable inflation has been a fixture both of the “Great Moderation” and the “Great Recession”. The “GM” had the additional feature that NGDP (and RGDP) was relatively stable. That feature has been lost since 2008. And inflation remains low and stable because nominal spending, although showing some growth, has been depressed for more than four years.
What matters for overall economic stability is nominal (not just inflation) level stability.