Research Brief: Inflation – April 2022

Inflation pressures persist. The Consumer Price Index increased by another multidecade high margin in March as multiple factors drive ongoing upward price movements. The widespread economic shutdown in 2020 led to unprecedented levels of fiscal stimulus, engorging the money supply, while the Federal Reserve also boosted liquidity by cutting lending rates and offering new programs. Aided by this support, consumer demand leapt ahead of supply as the economy unevenly reopened, hindered by a logjammed global supply chain. This demand-supply imbalance extends to the labor market and is lifting wages, along with the prices of many goods and services, resulting in further cost pressure on businesses. An ongoing housing shortage is also driving up the cost of homeownership, while conflict in Eastern Europe is disrupting energy markets. The Fed is signaling aggressive policies to combat this inflation, but their measures will take time to manifest as the many underlying issues persist.

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