IMF Working Papers

The Rise and Retreat of US Inflation: An Update

By Laurence M. Ball, Daniel Leigh, Prachi Mishra

May 16, 2025

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Format: Chicago

Laurence M. Ball, Daniel Leigh, and Prachi Mishra. "The Rise and Retreat of US Inflation: An Update", IMF Working Papers 2025, 094 (2025), accessed June 19, 2025, https://doi.org/10.5089/9798229007719.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Why did US inflation rise over 2021-22 and why has it retreated since then? Ball, Leigh, and Mishra (2022), writing near the inflation peak, explained the rise with a framework in which inflation depends on three factors: long-term expectations; the tightness of the labor market as measured by the vacancy-to-unemployment (V/U) ratio; and large changes in relative prices in particular industries such as energy and autos. This paper finds that the same framework explains the retreat in inflation since our earlier work.

Subject: Energy pricing, Expenditure, Inflation, Labor, Labor markets, Prices

Keywords: Copyright page, Core inflation, Core inflation gap, Energy pricing, Global, Headline inflation shock, Inflation, Inflation peak, Inflation shocks, Labor markets, Phillips curve, US inflation

Publication Details

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