When does transitory inflation become sustained?

AT NEARLY 43 years old, the median American worker had never in her career experienced an annual rate of “core” inflation, which excludes volatile food and energy prices, above 3%—until April this year. Figures published on May 28th showed that core personal-consumption-expenditure inflation, a measure closely watched by the Federal Reserve, rose to 3.1%. Some economists sense the first stirrings of an outbreak of sustained high inflation, like that which afflicted many countries in the 1970s. But prevailing theories of inflation suggest that, for now at least, this threat remains remote.The Great Inflation, as the episode in the 1970s is often called, led to radical revisions in macroeconomic thinking. Until then Keynesian economists believed that a permanently lower rate of unemployment could be achieved by accepting higher inflation. Critics of this view, like Milton Friedman and Robert Lucas of the University of Chicago, thought differently. In the long run, they argued, the unemployment rate was determined by an economy’s structural features. A government using easy money to push joblessness below this “natural” level would fail. Instead, inflation would accelerate as people learned to expect faster price growth.