Worried about the potential for rising inflation? Steven Blitz offers a counterargument in a Barron’s column.

During this unusual recovery, experts, including some at the Federal Reserve, have whipped up a tsunami of opinion that a “normal” growth cycle was about to emerge—only to be disappointed, repeatedly. The current widespread notion of inflation turning up in 2017—supported by last week’s report of a 2.1% jump in the consumer-price index in December—seems another rush to judgment.

Three factors drive core inflation: total consumer income, which is a product of wages, employment, and hours worked as measured by the index of aggregate weekly payrolls; the dollar, or the cost of things we like to buy; and the growth of borrowing—leveraged spending. A cleareyed look at the numbers behind these factors indicates that core inflation in 2017 will be pulled lower. …

… The Fed’s quantitative-easing moves ballooned its balance sheet by creating commercial bank deposits at the central bank that are available for banks to lend out. This hasn’t happened. It takes a rapid expansion of bank credit to fuel the leveraged spending that becomes too much money chasing too few goods—the definition of inflation. In December, total loans and leases at commercial banks were up 6.5% over the prior December. A year earlier, the increase was bigger, 7.9%.The pace of borrowing dropped off in the fourth quarter, leaving the year’s growth below 2015’s pace—another factor pulling inflation risk lower.

The price changes needed for a market economy to function differ from inflation. The factors I’ve noted affect inflation, and they are abating. Energy and rent are price changes pushing up total CPI and CPI excluding food and energy. When these prices rise as growth in total consumer income decelerates, we get a kind of consumption tax, which could explain sluggish December retail sales.

Nothing now conjures higher core inflation; quite the opposite.