Inflation's Rise and Fall: RECENT PRICE SWINGS REFLECTED LARGELY ENERGY-AND SUPPLY-RELATED SHOCKS RATHER THAN MACROECONOMIC OVERHEATING.

The article discusses the rise and fall of inflation, attributing recent price swings to energy and supply-related shocks rather than macroeconomic overheating. The authors present two explanations for the simultaneous rise in inflation across countries: domestic drivers, such as the pandemic and associated economic policy measures, and global causes, such as the surge in energy and food prices and geopolitical events. The research findings indicate that headline shocks and their pass-through into core inflation account for the majority of the rise and fall of inflation, with broader measures of macroeconomic slack and changes in long-term inflation expectations playing a smaller role. The article emphasizes the importance of local circumstances and policies in driving inflation, with differences in energy price policies and subsidies explaining variations in the role of energy price shocks. Monetary policy is also highlighted as a critical factor in controlling inflation, with long-term inflation expectations remaining well anchored. [Extracted from the article]