As the world was recovering from the pandemic, inflation shot up, owing to widespread disruptions to global supply chains and sudden changes in patterns of demand. (Disinflation is a decline in the rate of inflation, not necessarily of the actual price level, and is what matters for central banks monitoring changes in prices. The pandemic-induced inflation was exacerbated further by Russia’s invasion of Ukraine, which caused a spike in energy and food prices. There is no evidence that countries with 2% inflation do better than those with 3% inflation; what matters is that inflation is under control. Once again, the standard macroeconomic relationship between inflation and unemployment – expressed in the Phillips curve – was not borne out.
Source: Stuff November 14, 2023 02:27 UTC