M2 Growth Below 4% + Velocity at 25-Year Lows + 4% Real GDP Growth This Year = No Inflation
Here's an updated chart of annual M2 growth, with data through the second week of February. For the week ending on February 11, annual M2 growth was only 3.9%, more than two percentage points below the 6.05% average since 2000. If that kind of M2 growth continues this year, and if we have 4% growth in real output this year, there's very little chance of inflationary pressure building in the U.S. economy. Moreover, M2 velocity as of the last quarter of 2010 was close to a 25-year low (data here), so it just doesn't appear that we have any of the right ingredients for rising inflation.