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MIL-OSI USA: Brainard, What Can We Learn from the Pandemic and the War about Supply Shocks, Inflation, and Monetary Policy? foreignaffairs.co.nz - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from foreignaffairs.co.nz Daily Mail and Mail on Sunday newspapers.
<p><span>Policymakers and researchers have begun reassessing certain features of the economy and monetary policy in light of recent experience. After several decades in which supply was highly elastic and inflation was low and relatively stable, a series of supply shocks associated with the pandemic and Russia s war against Ukraine have contributed to high inflation, in combination with a very rapid recovery in demand. The experience with the pandemic and the war highlights the challenges for monetary policy in responding to a protracted series of adverse supply shocks. In addition, to the extent that the lower elasticity of supply we have seen recently could become more common due to challenges such as demographics, deglobalization, and climate change, it could herald a shift to an environment characterized by more volatile inflation compared with the preceding few decades.</span></p> ....
<p><span>Over the past year, inflation has been very high in the United States and around the world (</span><a id="fig1" href="https://www.federalreserve.gov/images/brainard-figure1-20220907.png" data-toggle="lightbox" data-gallery="global-figures" data-flickr="false">figure 1</a><span>). High inflation imposes costs on all households, and especially low-income households. The multiple waves of the pandemic, combined with Russia s war against Ukraine, unleashed a series of supply shocks hitting goods, labor, and commodities that, in combination with strong demand, have contributed to ongoing high inflation. With a series of inflationary supply shocks, it is especially important to guard against the risk that households and businesses could start to expect inflation to remain above 2 percent in the longer run, which would make it much more challenging to bring inflation back down to our target. The Fed ....