Earlier in this episode, the economy benefited from a series of favorable relative price shocks and, throughout the last several years, has been adjusting to an increase in productivity growth. Both of these developments have had a temporary disinflationary effect. Together they suppressed inflation for a while, countering the potential inflationary consequences of the progressive increase in aggregate demand relative to potential supply.
* * * Today marks the 75th anniversary of the end of the Second World War in Europe, while tomorrow marks the 70th anniversary of Europe’s response to that cataclysm: the Schuman declaration that set us on the path towards deeper European union. The declaration famously maintained that “Europe will not be made all at once, or according to a single plan.