McDonald’s v Burger King: what a price war means for inflation

Since June 25th Americans hungry for a deal have been able to get a sandwich, fries, chicken nuggets and soft drink under the golden arches for just $5. Burger King, a rival fast-food chain, is matching the offer with a $5 meal deal of its own. The two are following in the footsteps of Wendy’s, which is temporarily adding an ice cream to its long-standing Biggie Bag combo. Starbucks, seemingly determined to protect its reputation for high mark-ups, is pricing a sandwich and a coffee at $6. McDonald’s calls this the “summer of value”; economists call it deflation. However labelled, the development is heartening for both consumers and Federal Reserve officials, who hope to reduce interest rates before the year is out.