Anyone Else Skeptical About Inflation?

Seeing a lot of fearful inflation posts lately. Am I the only one who thinks this doesn't make sense?

[https://www.federalreserve.gov/newsevents/speech/clarida20200831a.htm](https://www.federalreserve.gov/newsevents/speech/clarida20200831a.htm)

The federal reserve has recently revised down the "neutral real interest rate" (r\*) from 4% to 2%.

This totally aligns with reality. We are seeing all G7 economies mature towards a 0-2% real GDP growth rate. It's just a lot harder to grow a $20T economy by 4% than a $1T economy, obviously.

Not only that, but technology is a hugely deflationary force as well. Think about how many products are now free apps on your phone (maps, white pages, encyclopedia, telecommunications, etc).

The fed is clear in saying that a 2% natural real rate with sub 2% inflation leaves them less room to work with during a crisis. They say inflation expectations are largely based on historical inflation, and we are not hitting 2% in part because we haven't hit 2% in a long time. So letting inflation run a bit hotter for some period could reset those expectations closer to 2% will give them policy room.

Inflating the debts is definitely a nice side effect and probably the "unsaid part". However, they have set a clear target still of 2% inflation and price stability \*over the long term\*.

The fears of hyperinflation seem pretty silly to me. We are living in a time of historically LOW inflation and deflationary technology pressures. If we hit 4-5% inflation on a given year, we aren't going to turn into Zimbabwe.

What scares me more is a taper tantrum like we saw in 2018. However, this time around, the fed will not be aiming for 4-5% anymore but closer to 2%. So it should be less aggressive there, but many assets are still vulnerable to multiple collapse as risk-free rates bounce back above their current level. I have no idea how to avoid this because risk-free rates affect multiples across bonds, real estate and equities.