Project Syndicate: Turns out that inflation really was transitory, no thanks to the Fed

by | Nov 13, 2023 | Stock Market

“Markets largely understood this all along. That is why inflationary expectations remained tame.”

As the world was recovering from the COVID pandemic, inflation shot up, owing to widespread disruptions to global supply chains and sudden changes in patterns of demand. While the demand shifts might have posed a challenge to price stability even in the best of times, the breakdown in supply chains made matters worse. Markets could not respond immediately to the new demand patterns, so prices increased.

Recall that consumers initially experienced a car shortage, simply because there was a shortage of computer chips — a problem that took 18 months to correct. The issue was not that manufacturers had forgotten how to produce cars or lacked trained worker …

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