With consumers carrying too much debt, spending was inevitably going to give way to more saving as consumers attempted to restore the health of their balance sheets. That process has been playing out, and the drag from deleveraging is waning. In addition, steady, moderate job growth has led to modest increases in income.
"2 One useful insight into how actual inflation may affect expectations about its future path is based in the concept of "rational inattention. "3 When inflation is persistently high, households and businesses must pay close attention and incorporate inflation into their economic decisions. When inflation is low and stable, they are freer to focus their attention elsewhere.