Monetary Policy & Inflation | US
A Framework for Forecasting US Inflation
- By Sam van de Schootbrugge
- 7 min read
Summary
- A new IMF working paper revisits the causes of the dramatic rise in US inflation during the Covid era.
- The authors find the ongoing labour market tightness, plus shocks to headline inflation from energy prices and supply chain issues, can explain the acceleration in core CPI.
- Looking ahead, unemployment at 4.4% is unlikely to return inflation to target by 2025, meaning the Fed will need to slow the economy by more than it currently forecasts.
Introduction
Inflation has become the central economic problem of the Covid era. In 2022 alone, our Deep Dive series has covered its origins, level, persistence and impact. We also explained how shocks to food prices and supply chains filter into headline CPI and showed how developments in the housing and labour markets help determine the trajectory of inflation.
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