The money supply predicted inflation’s fall. Who’s actually surprised?

The news that growth in the much-watched Consumer Price Index continued to fall in June was greeted with virtual shouts of acclamation on Wall Street and elsewhere. At last, it seemed, the cold water the Federal Reserve has been throwing on the economy is quenching inflation’s flames. But while the news is good, it’s no surprise to observers of the money supply. Oddly, few, if any, commentators noted this in their reactions or bothered to remind us that money really matters.

The pattern is clearly seen in the events of the last few years and suggests we will continue to see slowing CPI growth in the months ahead, but perhaps not by as much as noted recently.

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