Was high inflation inevitable?

Source: EconLog
by Scott Sumner

“During the period following the 2020 Covid pandemic, many countries experienced relatively high inflation. This reflects two factors: 1. All countries were hit by shocks such as Covid-related supply chain disruptions and the Ukraine war. 2. Most countries enacted very extensive stimulus programs, which had similar effects in each case. It was appropriate to allow some increase in inflation in response to negative supply shocks. That’s the whole idea behind ‘flexible’ average inflation targeting. But the actual rate of inflation also reflected excessive aggregate demand growth, and thus was inappropriately high in many countries, including the US. I worry when people seem to suggest that there wasn’t much the Fed could have done about the inflation surge because it also occurred in many other nations. In fact, not all countries experienced extremely high inflation.” (05/06/24)