Some of this collective error resulted from developments that forecasters did not or could not expect. Fed Chair Jerome Powell, among many others, blamed the Delta variant of the coronavirus for slowing the reopening of the economy and thus driving inflation higher. But Powell and others had earlier argued that the increase in inflation in the spring of 2021 was spurred by an overly rapid reopening as vaccination reduced case numbers. It is unlikely that both of these excuses are correct. The emergence of Delta, like the pandemic in 2020, probably kept inflation lower than it otherwise would have been.

Supply-chain disruptions were another unanticipated development that allegedly blew up inflation forecasts. But while the pandemic has caused some genuine bottlenecks in production networks, most are churning out much more than last year, with both US and global manufacturing output and shipping up sharply.

This brings us to a more important source of forecasting error: not taking our economic models seriously enough. Forecasts based on extrapolation from the recent past are nearly always as good as, or better than, those based on more sophisticated modeling. The exception is when there are economic inputs that are well outside the realm of recent experience. For example, the extraordinary $2.5 trillion in fiscal support for the US economy in 2021, amounting to 11% of GDP, was far larger than any previous fiscal package since World War II.