Inflation Is Global & Local

Inflation has soared around the world over the past year. At first, last spring, it was attributed to “transitory” supply-chain problems that have turned out not to be transitory but persistent. Then all last year, excessively stimulative US fiscal policy fueled a demand boom that worsened the global supply shock caused by the pandemic. Early this year, Russia’s invasion of Ukraine exacerbated energy and food inflation around the world.

Until recently, the major central banks responded to the pandemic with ultra-easy monetary policy, which poured gasoline on the various inflationary flare-ups. In other words, inflation hasn’t been solely a monetary phenomenon.