TY - BOOK ID - 136038375 TI - Understanding U.S. Inflation During the COVID Era AU - Ball, Laurence. AU - Leigh, Daniel. AU - Mishra, Prachi. PY - 2022 SN - 9798400222764 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Ukraine KW - Macroeconomics KW - Economics: General KW - Inflation KW - Labor KW - Diseases: Contagious KW - Price Level KW - Deflation KW - Central Banks and Their Policies KW - Unemployment: Models, Duration, Incidence, and Job Search KW - Demand and Supply of Labor: General KW - Health Behavior KW - Economic & financial crises & disasters KW - Economics of specific sectors KW - Labour KW - income economics KW - Infectious & contagious diseases KW - Prices KW - Unemployment rate KW - Unemployment KW - Labor markets KW - COVID-19 KW - Health KW - Currency crises KW - Informal sector KW - Economics KW - Labor market KW - Communicable diseases KW - Covid-19 KW - Income economics UR - https://www.unicat.be/uniCat?func=search&query=sysid:136038375 AB - This paper analyzes the dramatic rise in U.S. inflation since 2020, which we decompose into a rise in core inflation as measured by the weighted median inflation rate and deviations of headline inflation from core. We explain the rise in core with two factors, the tightening of the labor market as captured by the ratio of job vacancies to unemployment, and the pass-through into core from past shocks to headline inflation. The headline shocks themselves are explained largely by increases in energy prices and by supply chain problems as captured by backlogs of orders for goods and services. Looking forward, we simulate the future path of inflation for alternative paths of the unemployment rate, focusing on the projections of Federal Reserve policymakers in which unemployment rises only modestly to 4.4 percent. We find that this unemployment path returns inflation to near the Fed’s target only under optimistic assumptions about both inflation expectations and the Beveridge curve relating the unemployment and vacancy rates. Under less benign assumptions about these factors, the inflation rate remains well above target unless unemployment rises by more than the Fed projects. ER -