Steve Hanke is an economist at Johns Hopkins University

The United States no longer has an inflation problem, according to veteran economist Steve Hanke.

“I think the inflation story is a historical one,” said Hanke, a professor of applied economics at Johns Hopkins University. “One of the reasons for that is because the money supply is contracting year-on-year by 4% in the United States.” In an interview with CNBC’s “Street Signs Asia” on Thursday.

“We haven’t seen that since 1938,” Hanke said. “Changes in the money supply cause changes in the price index and inflation.”

The US inflation rate for June came in less than expected at 3% on Wednesday, the smallest year-on-year increase in two years. The core CPI, which excludes volatile food and energy prices, rose 4.8% from a year ago and 0.2% month over month.

Recent data may give the Federal Reserve some wiggle room as the central bank navigates the direction of interest rate policy.

The producer price index in the US is due later on Thursday. If it also shows lower rates, this could further influence the Fed’s decision to end the rate hike cycle soon.

Traders are betting that there is a 92.4% chance that the Fed will keep interest rates unchanged at its July meeting, according to CME FedWatch a tool.

“When inflation was going up and down, first the PPI went up and then the CPI went up. Then finally the core gradually went up like a snail,” Hanke said.

“Now we’ve turned things around, and PPIs are down like a stone. CPI, they’re falling pretty much like a stone. And the core is way behind,” he said, adding, “We’re going to see it all come down as long as they keep quantitative tightening.”

Central bank policymakers tend to look more at core inflation, which is still well above the Fed’s annual target of 2%.

But Hankey noted that if the Fed “continues to do what it’s doing,” it could get to the “2% range very quickly.”

“Forget all the propaganda we hear – that the Fed chairman has a tough problem, that this is going to be a long fight, things are sticky etc. Things are not sticky,” said the professor.

– CNBC’s Jeff Cox contributed to this article