Editing Inflation (section)

==== 2021–2022 inflation spike ====

{{main|2021–2022 inflation spike}}

In 2021–2022, most countries experienced a considerable [[2021–2023 inflation surge|increase in inflation]], peaking in 2022 and declining in 2023. The causes are believed to be a mixture of demand and supply shocks, whereas inflation expectations generally seem to remain anchored (as per May 2023).<ref name="Brookings">{{cite web |last1=Bernanke |first1=Ben |last2=Blanchard |first2=Olivier |title=What Caused the U.S. Pandemic-Era Inflation? |url=https://www.brookings.edu/wp-content/uploads/2023/04/Bernanke-Blanchard-conference-draft_5.23.23.pdf |website=www.brookings.edu |publisher=Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution |access-date=15 October 2023 |date=May 23, 2023}}</ref> Possible causes on the demand side include expansionary fiscal and monetary policy in the wake of the global [[COVID-19 pandemic]], whereas supply shocks include [[supply chain]] problems also caused by the pandemic<ref name="Brookings" /> and exacerbated by energy price rises following the [[Russian invasion of Ukraine]] in 2022. 

The term [[sellers' inflation]] was coined during this period to describe the effect of corporate profits as a possible cause of inflation: Price inelasticity can contribute to inflation when [[Consolidation (business)|firms consolidate]], tending to support monopoly or [[monopsony]] conditions anywhere along the [[supply chain]] for goods or services. When this occurs, firms can provide greater [[shareholder value]] by taking a larger proportion of [[Profit (accounting)|profits]] than by investing in providing greater volumes of their outputs.<ref>{{cite book |last1=Mankiw |first1=N. Gregory |title=Principles of economics |date=2015 |publisher=[[Cengage Learning]] |isbn=978-1285165875 |edition=Seventh |location=Stamford, Connecticut |pages=257–367 |language=en-us |chapter=Part V, chapters 13–17}}</ref><ref>{{cite web |last1=Bivins |first1=Josh |title=Corporate profits have contributed disproportionately to inflation. How should policymakers respond? |url=https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/ |website=Economic Policy Institute |access-date=25 May 2022 |date=21 April 2022 |archive-date=May 25, 2022 |archive-url=https://web.archive.org/web/20220525111507/https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/ |url-status=live }}</ref> Shortly after initial energy price shocks caused by the Russian invasion of Ukraine had subsided, oil companies found that supply chain constrictions, already exacerbated by the ongoing global pandemic, supported price inelasticity, i.e., they began lowering prices to match the [[price of oil]] when it fell much more slowly than they had increased their prices when costs rose.<ref>{{cite news |last1=Cronin |first1=Brittany |date=7 May 2022 |title=The good times are rolling for Big Oil. 3 things to know about their surging profits |url=https://www.npr.org/2022/05/07/1097177459/big-oil-exxon-earnings-gasoline-prices-crude |url-status=live |archive-url=https://web.archive.org/web/20220521123900/https://www.npr.org/2022/05/07/1097177459/big-oil-exxon-earnings-gasoline-prices-crude |archive-date=May 21, 2022 |access-date=25 May 2022 |work=NPR |language=en}}</ref>

The [[quantity theory of money]] has long been popular with [[libertarian-conservative]] critics of the Federal Reserve. During the COVID pandemic and its immediate aftermath, the M2 money supply increased at the fastest rate in decades, leading some to link the growth to the 2021-2023 inflation surge. Fed chairman [[Jerome Powell]] said in December 2021 that the once-strong link between the money supply and inflation "ended about 40 years ago," due to financial innovations and deregulation. Previous Fed chairs [[Ben Bernanke]] and [[Alan Greenspan]], had previously concurred with this position. The broadest measure of money supply, M3, increased about 45% from 2010 through 2015, far faster than GDP growth, yet the inflation rate declined during that period — the opposite of what monetarism would have predicted. A lower [[velocity of money]] than was historically the case<ref>{{cite news |title=Velocity of M2 Money Stock |url=https://fred.stlouisfed.org/series/M2V |publisher=[[Federal Reserve Bank of St. Louis]]}}</ref> was also cited for a diminished effect of growth in the money supply on inflation.<ref>{{cite news |last1=Hanke |first1=Steve H. |last2=John Greenwood |title=Inflation Was Always a Monetary Phenomenon, Never Transitory |url=https://www.nationalreview.com/2024/01/inflation-was-always-a-monetary-phenomenon-never-transitory/ |work=[[National Review]] |date=January 15, 2024}}</ref><ref>{{cite news |last1=Lynch |first1=David J. |title=Inflation has Fed critics pointing to spike in money supply |url=https://www.washingtonpost.com/business/2022/02/06/federal-reserve-inflation-money-supply/ |newspaper=[[The Washington Post]] |date=February 6, 2022}}</ref>