![]() In this Economic Letter we widen the recent analysis with an international comparison. There are many reasons to expect inflation to be higher than normal (Barnichon, Oliveira, and Shapiro 2021 Bianchi, Fisher, and Melosi 2021 Shapiro 2021a,b). However, global supply chain distortions persist, and subsequent waves of COVID-19 infections continue to disrupt service-oriented industries. Meanwhile, the gap between actual GDP and its potential rate has nearly closed to less than 0.5%, as calculated by the Congressional Budget Office. Unemployment recovered from a high of 14.7% in April 2020 to 3.8% in February 2022. economy has rebounded at an astonishing rate. In the same month, the Federal Reserve lowered the target range for the federal funds rate to 0–¼% and introduced additional measures to ease liquidity.Īs we begin the third year since the start of the pandemic, the U.S. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law in March 2020. The United States introduced unprecedented fiscal and monetary policy responses to provide rapid economic relief. Estimates suggest that fiscal support measures designed to counteract the severity of the pandemic’s economic effect may have contributed to this divergence by raising inflation about 3 percentage points by the end of 2021.ĭownload replication data zip file (373 KB)įew people would question the devastating economic consequences of the COVID-19 pandemic, which resulted in a dramatic collapse in economic activity and loss in employment worldwide. inflation has increasingly outpaced inflation in other developed countries. However, since the first half of 2021, U.S. Problems with global supply chains and changes in spending patterns due to the COVID-19 pandemic have pushed up inflation worldwide. Inflation rates in the United States and other developed economies have closely tracked each other historically.
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