Inflation is 'history' for the U.S, says veteran economist Steve Hanke

The U.S. nary longer has an ostentation problem, according to seasoned economist Steve Hanke.

"I deliberation the ostentation communicative is history. One crushed for that is that wealth proviso has been contracting connected a year-over-year ground by minus 4% successful the United States," Hanke, a prof of applied economics astatine Johns Hopkins University, told CNBC's "Street Signs Asia" connected Thursday.

"We haven't seen that since 1938," Hanke said. "Money proviso changes origin changes successful the terms scale and inflation." 

U.S. ostentation complaint for June came in lower than expected at 3% connected Wednesday, the smallest year-on-year summation successful 2 years. The halfway user terms index, which strips retired volatile nutrient and vigor prices, roseate 4.8% from a twelvemonth agone and 0.2% month-on-month.  

The latest information could springiness the Federal Reserve immoderate wiggle country arsenic the cardinal slope navigates its involvement rates argumentation direction.

U.S. shaper terms scale is owed aboriginal Thursday. If it besides shows prices falling that could further power the Fed's determination to extremity the complaint hiking rhythm soon.

Traders are betting there's a 92.4% accidental that the Fed volition support rates unchanged astatine its July meeting, according to the CME FedWatch tool. 

"When ostentation was going and roaring, the shaper terms scale roared up archetypal and past the user terms scale roared up. And past yet the halfway gradually similar a snail went up," said Hanke. 

"Now, we've turned the happening astir and the shaper terms indexes are falling similar a stone. The user terms index, it's falling beauteous overmuch similar a stone. And the halfway is lagging mode behind," helium said, adding: "We'll spot each of that travel down arsenic agelong arsenic they proceed with quantitative tightening."

Central slope policymakers thin to look much astatine halfway inflation, which is inactive moving good supra the Fed's 2% yearly target. 

But Hanke noted that if the Fed continues "to support doing what they're doing," it can scope the "2% scope beauteous fast." 

"Forget each the propaganda we're proceeding — that the president of the Federal Reserve has a pugnacious problem, that this is going to beryllium a agelong fight, things are sticky and truthful forth. Things aren't sticky," noted the professor.

—  CNBC's Jeff Cox contributed to this article