Why US inflation is so high, and when it may ease (Paul Wiseman,AP News, November 12, 2021) For months, many economists had sounded a reassuring message that a spike in consumer prices, something that had been missing in action in the U.S. for a generation, wouldn't stay long. It would prove "transitory, " in the soothing words of Federal Reserve Chair Jerome Powell and White House officials, as the economy shifted from virus-related chaos to something closer to normalcy. On Wednesday, the government said its consumer price index soared 6.2% from a year ago - the biggest 12-month jump since 1990. Consumer price inflation will likely endure as long as companies struggle to keep up with consumers' prodigious demand for goods and services. A resurgent job market - employers have added 5.8 million jobs this year - means that Americans can continue to splurge on everything from lawn furniture to new cars. And the supply chain bottlenecks show no sign of clearing. The run-up in consumer prices has raised the specter of a return to the "stagflation" of the 1970s. That was when higher prices coincided with high unemployment in defiance of what conventional economists thought was possible. Is 1970s Stagflation Making a Comeback? (Charles Sizemore, Kiplinger's Retirement Report, December 2021) Stagflation is the unholy union of sluggish growth (or stagnation) and inflation. Today, we also have major demand-pull inflation from low interest rates and COVID relief that put money into American pockets. Labor shortages from the Great Resignation have led to rising wages. Thanks to a wrecked post-COVID supply chain, we also have plently of cost-push inflation. Everything from lumber to microchips is in short supply, spiking higher prices. Supply chain disruptions won't last forever. This might very well be a lean Christmas, but eventually the supply chains will recover. Prices might not fall tomorrow, but they will moderate as supplies get back to something resembling normal. Stagflation Is All Anyone in Markets Wants to Talk About Now (Katie Greifield, Bloomberg, October 12, 2021) "The reality that inflation is more persistent and sustainable than the 'transitory' camp thought, and that inflation and its causes are in turn slowing economic growth," said Peter Boockvar, chief investment officer for Bleakley Advisory Group. The commodity surge has thrust stagflation fears front-and-center in markets, given that higher energy prices have the potential to pinch consumers, according to Principal Global Investors. Gains in consumer spending are already expected to slow, leading Goldman economists to slash U.S. growth estimates over the weekend. Stagflation sensation - Is the world economy going back to the 1970s? (The Economist, October 9, 2021) One parallel is that the world economy is once again weathering energy- and food-price shocks. Other costs are rising too: shipping rates have soared, because of a shift in consumer spending towards goods and covid-related backlogs at ports. Workers are enjoying greater bargaining power this year, as firms facing surging demand struggle to attract sufficient labour. The Fed that failed (The Economist, April 23, 2022) The usual way to rein in inflation is to raise rates above their neutral level - though to be about 2-3% - by more than the rise in underlying inflation. That points to a federal-funds rate of 5-6%, unseen since 2007. Rates that high would tame rising prices - but by engineering a recession. In the past 60 years the Fed has on only 3 occasions managed significantly to slow America's economy without causing a downturn. It has never done so having let inflation rise as high as it is today