US Post-Pandemic Inflation Defies Mainstream Economic Theories

Post-pandemic inflation has returned to the US, with an average annual rise in consumer price inflation of 3.9% since 2020. This rate is more than twice that of the disinflationary 2010s and the highest since the 1980s.

The Federal Reserve's 2% inflation target has been consistently missed, with the official consumer price index rising at a 4.0% annualized rate since January 2020 and currently 13% above the 2% trend.

Mainstream economic theories, including monetarism and Keynesianism, have failed to explain post-pandemic inflation. Central banks continue to cite old causes of inflation and adopt the same policies as before 2020.

Experts like Huw Pill, chief economist at the Bank of England, argue that interest rate rises were designed to cool spending power and pass on the pain of inflation to others, likely referring to workers' real incomes.