The end of inflation (again, and again)

Weekly Updates

Developed economies’ inflation is repeatedly ending. There have been a series of one-off inflation shocks over five years: pandemic supply chain problems, Russia’s invasion of Ukraine, US tariffs, the Gulf war. Each raised specific prices. Then, that inflation stopped or reversed—to be replaced by the next shock.
Oil prices rose with Russia’s invasion of Ukraine, then fell during the US tariff period, then rose with the Gulf war. Household appliance prices rose with the post-pandemic supply problems, then fell despite the Russia-Ukraine war, before rising (in the US, but not Europe) with tariffs. For both goods and services, the prices that cause inflation in one year do not drive inflation the next year.
This differs from past significant inflation episodes when imbalances in the economy drove general price increases across a wide range of products. Inflation drivers would linger for years at a time.
Consumers feel they are in a continuous inflation cycle—every year, another price increase chips away at consumers’ spending power. But economic conditions today do not allow specific inflation increases to last. Despite five years of repeated headline inflation shocks, economies lack the structural inflation-producing problems that would recreate past persistent inflation episodes. The world just needs the shocks to stop.