Whither inflation? The scourge of creditors and currencies was supposed to have broken out of its cage by now.
Federal Reserve Chairman Alan Greenspan, the nation's chief inflation fighter, appeared to wonder in recent testimony to Congress where it has gone. After all, the unemployment rate has for some time been running below the supposed inflationary breakout level.
Several economists, citing labor costs, warn that inflation is indeed starting to regain a foothold. They think the central bank's Federal Open Market Committee should take corrective action by increasing interest rates Tuesday.
But quite a few others cannot find clear-cut evidence of renewed pressure on prices and see no threat at home or abroad.
"Inflationary pressures remain subdued in both industrialized countries and the emerging markets," according to economists Donald H. Straszheim and John Praveen of Merrill Lynch & Co.
Global inflation is expected to average 5.1% this year and 4% next year, down from 7.9% in 1995, they said.
In this country, investors last week were startled by an unexpected uptick in the consumer price index. Still, the CPI is running at a 2.7% year-over-year rate versus a peak of 6.4% in October 1990.
"Since late 1991, consumer price inflation has been remarkably flat, hovering between 2.5% and 3.25% year-over-year," noted Mickey D. Levy, chief financial economist for NationsBanc Capital Markets, a unit of NationsBank Corp.
Meanwhile, for the last 18 months the jobless rate has hovered around 5.5%, which Mr. Levy noted is "well below earlier standard estimates of the nonaccelerating inflation rate of unemployment."
Some business economists are beginning to agree with Lester Thurow of the Massachusetts Institute of Technology that inflation may be an "extinct volcano."
Edward Yardeni, chief economist at Deutsche Morgan Grenfell/C.J. Lawrence Inc., who has forecast falling inflation for more than a decade, sees the low-inflation trend continuing indefinitely. He expects the U.S. CPI inflation rate to range from 1% to 2%, which is essentially zero inflation.
Mr. Yardeni cites the global economic impact of the end of the Cold War, as well as the anti-inflation vigilance of the Fed and other central banks, as the biggest reasons for the change.
"I worry as much about deflation as inflation, although I don't worry much about either one," Mr. Yardeni said last week. "We have endured a lot of pain to reach this point with inflation, and now we can enjoy it a little."
He noted, however, that zero inflation is not a totally relaxed economic environment. "Capitalism is less fun without a little inflation," he said. "If there's no way to raise prices, everybody has to work that much harder."
The debate about zero inflation was recently sharpened by the release of a Brookings Institution study suggesting that the economy may not run very well at zero inflation, with slow growth and higher unemployment possibly resulting.
Other economists cite such costs in reaching zero inflation but believe they would be temporary. The Brookings study raised a few eyebrows because one of its authors, economist George Akerloff, is married to Fed Governor Janet Yellin.
This summer, an academic, nonpolicy study by the Fed staff raised the issue of "opportunistic disinflation." It pondered whether inflation would best be reduced further by awaiting a business slowdown rather than with monetary policy measures.
As usual, the Fed itself remains low profile and noncommittal, with Mr. Greenspan reiterating the central bank's vigilance against "a sustained pickup in inflation" but leaving unanswered questions about even lower inflation.
