The Rise and Retreat of US Inflation: An Update

IMF Working Papers, May 16, 2025

Source details

Core question:
- Why did US inflation rise over 2021-22 and why has it retreated since then?
Analytical framework (as in Ball, Leigh, and Mishra (2022)):
- Inflation depends on three factors:
- long-term expectations;
- the tightness of the labor market as measured by the vacancy-to-unemployment (V/U) ratio;
- large changes in relative prices in particular industries such as energy and autos.
Key conclusion:
- The paper finds that the same framework explains the retreat in inflation since the authors' earlier work.

Findings:
- The three-factor framework (long-term expectations; V/U ratio; relative-price shocks in industries like energy and autos) explains both the rise in US inflation over 2021-22 and its subsequent retreat.
Subjects and topical focus:
- Energy pricing, Expenditure, Inflation, Labor, Labor markets, Prices
Keywords present in the source:
- copyright page, Core inflation, core inflation gap, Energy pricing, Global, headline inflation shock, Inflation, inflation peak, Inflation shocks, Labor markets, Phillips curve, US inflation

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Disclaimer included in the source:
- "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."

Source: IMF Working Paper — "The Rise and Retreat of US Inflation: An Update", May 16, 2025.