How did the Fed get it so wrong on inflation?

Source: The Hill
by Vivekanand Jaykumar

“Whether rising inflation reflects a transitory phenomenon or a more pernicious and lasting surge in average price levels has been a much-debated issue. Recent data suggest that high inflation is likely to persist for longer than the Federal Reserve (the Fed) had projected. While a few economists (Paul Krugman and Brad DeLong) remain in the transitory inflation camp, most now view surging inflation as a serious problem. Many economists (most notably, Olivier Blanchard and Larry Summers) warned early and often that the inflation risk was real this time around. The failure of Fed officials to realize the fundamental differences between the Pandemic Recession and the Great Recession, along with an inability to envisage the inflationary consequences of a dramatically faster rebound this time around, contributed to critical policy errors.” (11/16/21)