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The Rise and Retreat of US Inflation: An Update

Author

Listed:
  • Laurence M. Ball
  • Mr. Daniel Leigh
  • Ms. Prachi Mishra

Abstract

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.

Suggested Citation

  • Laurence M. Ball & Mr. Daniel Leigh & Ms. Prachi Mishra, 2025. "The Rise and Retreat of US Inflation: An Update," IMF Working Papers 2025/094, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2025/094
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    Keywords

    Inflation; Inflation shocks; Core inflation; Phillips curve; inflation peak; US inflation; copyright page; headline inflation shock; core inflation gap; Labor markets; Energy pricing; Global;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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