Inflation: what went wrong, and why?

Three theories on the causes of high inflation and their implications for policy responses

Looming percentages

In the late summer of 2021, notably during the occasion of the Jackson Hole Conference, central banks were cautiously optimistic about future monetary conditions. The huge success of the widescale introduction of effective Covid-19 vaccines was allowing a recovery from lockdown. That recovery – interacting with the previous forceful expansionary measures, both fiscal and monetary, needed to offset the effect of the coronavirus pandemic and the countervailing lockdowns – would, it was felt, lead

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