The most straightforward explanation is that it took a lot longer than almost anyone predicted to get back to normal after the pandemic. Inflation also turned out to be largely caused by supply problems. That’s unusual. Normally, demand is what causes prices to spike. The Federal Reserve then hikes interest rates to kill demand, but this typically brings big job losses and a recession. This round was different because, after the pandemic, it took a long time to fix supply chains. Plus, there was a labor supply problem, as it took a while to get enough people back to work. As supply glitches abated in 2023, inflation subsided around the world.
This isn’t the full story in the United States. Americans kept their spending sprees going all year long. This, too, was a big surprise. Experts had predicted spending would nosedive as…
