U.S. policymakers misjudged inflation threat until it was too late

On July 19, 2021, President Biden played down the risk of persistent inflation, telling reporters that price hikes “are expected to be temporary.” This month, Biden called reining in prices his “top domestic priority.”

What changed?

A combination of factors including surges in the coronavirus, supply chain problems, Russia’s invasion of Ukraine and a dramatic shift in consumer spending patterns, all made things more expensive. It didn’t help that the increases began in uneven and seemingly disconnected ways. Housing prices went up, initially, because the pandemic changed where people wanted to live. Rental car prices went up, in part, because companies sold off their fleets when tourism dipped. But eventually these one-off developments fused to create a much broader calamity, rattling the economic and political foundations of the country — making clear policymakers had failed to recognize the mounting inflationary crisis.

Here’s a look back at what the top economic officials in the White House and the Federal Reserve were saying and doing about the problems as they developed, and how they fell behind…

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