A Walmart employee organizes products for the holiday season at a Walmart store in Teterboro, New Jersey.

Eduardo Munoz | Reuters

A little inflation might not be such a bad thing after all.

In light of Wednesday’s Department of Labor inflation report spooking stock markets and traders blaming rising prices for widespread sell-offs in tech stocks, attention has once again focused on how much Americans pay for all the things they consume.

The recent rebound in inflation could indeed be a temporary – and welcome – change for those concerned about a slowdown in US gross domestic product. When inflation is controlled, it is often a healthy by-product of a growing economy, which is why its dormancy has raised some eyebrows for much of the past decade.

For years, economists feared that sweeping macroeconomic changes – an aging population, fewer babies, the advent of automation – would anchor prices for decades.

Even some of Washington’s most expansive fiscal and monetary stimulus didn’t seem to be doing the trick.

Despite the passage of the Affordable Care Act in 2010, federal debt accelerated from 52% of GDP to 74% between 2009 and 2014 and the Fed, which kept interest rates at zero, escaped persistent inflation lawmakers for most of the two Missed terms of office of President Barack Obama.

However, prices have occasionally exceeded the Federal Reserve’s 2% target over the past decade. Between December 2011 and April 2012, the central bank’s preferred inflation measure, the core price index for personal consumption expenditure, outperformed this target.

But the kind of robust, long-lasting inflation the Fed is aiming for now has been fainted until recently. As a result of this move, inflation has only reached or exceeded the central bank’s 2% target 14 times over the 121 monthly readings over the past decade.

Although economists didn’t know at the time, April 2012 was the last time Obama saw inflation above 2%. Price growth remained well below the threshold well into President Donald Trump’s term in office.

In terms of face value and in isolation, Wednesday’s government inflation report could be troubling. The Bureau of Labor Statistics showed that in April the CPI accelerated at its fastest pace in more than 12 years.

Growth-oriented companies, which tended to be hit hard by soaring inflation via the Fed’s rate hike, sold across the board before and after the report. The Nasdaq Composite was down more than 5% in May alone.

And now with trillions of biden dollars pulsing through the economy and the Federal Reserve keeping interest rates near zero, Wall Street is getting cold feet over a return in inflation.

Even more than more than a decade ago during the financial crisis, policymakers on Capitol Hill and at the Fed have worked together to counter declining demand and mitigate the effects of the Covid-19 pandemic.

Trillions have been spent on various methods to contain both the virus and its depressive effects on US business. To encourage Americans’ demands to spend money and bail out small businesses, several rounds of economic reviews, increased unemployment benefits, and eviction moratoriums have been carried out.

After vaccinating more than half of the U.S. population and reopening businesses, the Biden government continues to advertise its infrastructure and family bills as much-needed incentives.

President Joe Biden reiterated that message on Friday after the government reported a far weaker than expected number in April.

“I think today’s report only underscores the importance of the measures we have taken,” said the President. “Our efforts are starting to work, but the climb is steep and we still have a long way to go.”

Silver lining

While stock traders are grumpy about the potential for inflation to undermine the purchasing power of future earnings, economists are trying to remind the world of a few key facts: Inflation is often a by-product of economic growth and is likely to be temporary.

In fact, it might even be good for the economy if a cocktail of monetary and fiscal stimulus can still spark both inflation and inflation fears, according to economist and former Treasury officer Nathan Sheets.

“I have a feeling that Jay Powell and his colleagues at the Fed are pretty relaxed about the outlook for inflation,” wrote Sheets, who once served as undersecretary of the Treasury for International Affairs, on Tuesday.

Sheets, now chief economist at PGIM Fixed Income, noted that central banks had struggled for the most part in generating healthy price growth for the past 10 years.

“The Fed has been in a fierce battle to boost inflation. Even if the rise in actual inflation is temporary, it could still help it achieve its goal,” he added. “At least the second half of this year will show that modern economies are at least able to generate inflation – which we have not seen for many years.”

As sluggish as inflation has been in the US over the years, the situation domestically is still far better than overseas.

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In Europe, central bankers are still battling the pesky opposite of inflation, deflation. While US economists resent over rising prices, European Central Bank President Christine Lagarde spent months trying to keep prices from falling until regular tourism and trade return before the pandemic.

Deflation can be particularly difficult to fight as falling prices can trigger a downward spiral of income and profit losses. Lower profits can lead to increased corporate bankruptcies, which in turn can lead to an increase in unemployment and a further decline in prices.

For their part, Fed officials have so far been unimpressed by the market’s inflation concerns. Fed Governor Lael Brainard, who is believed to be the potential successor to Powell, offered that clear view on Tuesday.

“A sustained material rise in inflation would not only require wages or prices to rise for a period after the reopening, but also a broad expectation that they will continue to rise at a sustained higher pace,” she said. “Past experience shows that many companies are likely to compress margins and rely on automation to drive costs down rather than pass on price increases entirely.”

A senior administration official reiterated that assessment to CNBC’s Ylan Mui on Wednesday, saying the economy “”Much remains to be done before higher inflation can be viewed as persistent rather than temporary.

The official added that the path of inflation is likely to be volatile and, while trending upwards, is a reflection of an economy rapidly recovering from the Covid-19 recession.

The long game

The real economic problems may actually be hidden in the back half of Brainard’s quote.

Prominent economists, led by former Treasury Secretary Larry Summers, have repeatedly warned that temporary spurts of inflation will not fix the underlying macroeconomic changes, such as automation and population slowdown, that have kept the target on target for so long.

Summers believes the US economy is in the middle of what is known as secular stagnation.

In contrast to the regular ebb and flow of business cycles that happen every few years, Summers argues that the US is in the middle of a slow, gradual process that will ultimately result in lower long-term GDP and inflation growth.

“I think there is another aspect of the situation that deserves our attention that tends not to be adequately reflected. And this is: The proportion of men or women or adults in the United States who work today is essentially the same as it was four years ago, “Summers told a meeting of economists at the International Monetary Fund in 2013.

Even a huge inflow of money from the Biden administration and the Fed cannot change the long-term effects of, for example, falling US birthrates and in turn no longer require as many factories, shops and companies.

Easy money cannot support the same real GDP growth indefinitely if population growth is stagnant or declining.

In this case, Summers began arguing in 2013 that the real equilibrium interest rate might actually be negative. He only repeated his theory last month when he spoke to the Financial Times.

“I looked at the global economy, and indeed the US economy in the pre-Covid era, and found that with real interest rates close to zero, there is a significant gap between personal savings and investment caused by demographics, cheap capital goods, inequality and technology,” he told the newspaper.

Here, Summers says savers have increasingly withdrawn more cash from traditional savings accounts because potential investors simply didn’t want additional funds, which could result in negative real interest rates.

Negative interest rates can mean that the current level of investment in the economy – the number of factories, houses, and other investments – is too high given the real needs of businesses and consumers.

“This significant gap has meant a deflationary bias, a tendency to lethargy, and a tendency for savings to flow into existing assets and create asset bubbles,” Summers told the FT last month.

Kelly Friendly, a spokeswoman for the former Treasury Secretary, didn’t respond to CNBC’s request to speak to Summers.