Category: Inflation
Page 1/5
The Illusion of Anchored Inflation Expectations
New research challenges a foundational assumption namely that central bank credibility has kept long-run inflation expectations firmly tethered to the 2% target. The stability observed since the 1980s may have been a passive artifact of decades of low inflation experience while the latest survey data suggest that, for U.S. consumers, the anchor the anchor might be breaking now at a speed not seen since the Great Inflation of the 1970s.
When Algorithms Set Prices, Measuring Inflation Gets Harder
From high-street retailers to online platforms, pricing algorithms are spreading fast but their impact on overall inflation is ambiguous. New research suggests that this mechanism can enable a single firm with a fast, persistent algorithm to unilaterally sustain prices above competitive levels.
De-Anchoring Risk: Evidence and Theory
Recent empirical work finds that the 2025 surge in U.S. household inflation expectations is almost entirely unexplained by standard price drivers, a warning sign reminiscent of the late 1970s. A complementary theoretical contribution shows why this matters so much.
Energy Shocks, Supply Chains, and Inflation
Two new papers explore why energy price shocks translate into sustained inflation: one paper shows that supply chain uncertainty causes firms to misread energy price signals and raise prices pre-emptively, while a second shows that production networks then amplify and prolong these inflationary pressures.
Uncertainty and Inflation
New evidence shows that uncertainty’s inflationary effects depend on where it originates in supply chains and the current inflation environment. Upstream sectoral uncertainty acts like a supply shock raising prices, with impacts amplifying 2-3 times when inflation already exceeds 6%.
Stablecoins and Inflation in the U.S. and Emerging Markets
Two 2025 studies show how stablecoins simultaneously serve as inflation hedges for households in emerging markets while reshaping global finance in ways that reduce central bank control over inflation in developing economies and create structural disinflationary pressure in the U.S.
Anchoring Inflation Expectations Remains Central Banks’ Greatest Challenge
A postmortem of the 2021-2022 inflation surge reveals how central banks’ institutional frameworks and misinterpretation of shocks allowed expectations to drift, while new evidence from euro area firms shows that despite successful disinflation, longer-term inflation expectations remain stubbornly unanchored and increasingly sensitive to short-term fluctuations.
Trade Disruptions and Inflation
Rising trade costs have fundamentally different inflationary effects depending on their timing, nature, and target: gradual fragmentation can paradoxically prove disinflationary, while sudden shocks trigger temporary stagflation; similarly, higher costs for final goods produce short-lived inflation spikes, whereas increased costs for intermediate inputs generate persistent price pressures through global value chain propagation.
Measuring Inflation Uncertainty and Its Economic Impact
Recent research highlights inflation uncertainty as a distinct welfare cost beyond the level of inflation itself, operating primarily through precautionary saving channels and households’ supply-side interpretation of economic shocks.
Political Identity Distorts Inflation Expectations
Partisan allegiances drive large and opposing shifts in Americans’ inflation expectations following major political events. New evidence also shows that the public consistently overestimates the degree of this partisan divide, highlighting how perceptions of polarization can amplify its real-world effects.