MNI BRIEF: Inflation Expectations Rise on More Govt Debt-Paper

News about rising government debt can trigger higher consumer inflation expectations according to a paper by two regional Fed advisers, backing former Treasury Secretary Larry Summers' warning that more fiscal stimulus "will set off inflationary pressures of a kind we have not seen in a generation."

Households ramp up inflation views as they anticipate some monetization of the debt, according to the paper by Yuriy Gorodnichenko and Michael Weber, advisers to regional Federal Reserve banks. The third author, Olivier Coibion, teaches at University of Texas at Austin.

Information about a permanent change to the fiscal picture boosts both short-run an long-run inflation expectations whereas consumer expectations are not sensitive to news about current deficit levels, according to the paper published Monday, based on a survey of roughly 80,000 U.S. consumers.

Current and former Federal Reserve officials have expressed similar worries about fiscal relief.