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Macro & Public Finance

The Rise and Retreat of US Inflation: An Update

by Dr. Prachi Mishra, Daniel Leigh, Laurence Ball

Why did US inflation rise over 2021-22 and why has it retreated since then? Ball, Leigh, and Mishra (2022), writing near the inflation peak, explained the rise with a framework in which inflation depends on three factors: long-term expectations; the tightness of the labor market as measured by the vacancy-to-unemployment (V/U) ratio; and large changes in relative prices in particular industries such as energy and autos. This paper finds that the same framework explains the retreat in inflation since our earlier work.

17 May, 2025

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