Why did inflation rise and fall in 2021–2024? Channels and evidence from expectations

Ricardo Reis

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This article uses inflation expectations to investigate the mechanisms that linked supply and demand shocks to inflation outcomes during 2021–2024. It describes several theoretical mechanisms through which shocks led to inflation, highlighting the role of expectations in this process. It uses multiple sources of expectations data for the United States, Euro area, and United Kingdom to evaluate each of these channels. Finally, it surveys the literature that has used expectations data to make sense of the 2021–2024 inflation surge. The article applies the results from this investigation to assess how well-anchored inflation expectations were during the surge and at the end of it.

Keywords: inflation disaster; market expectations; surveys; Phillips curve; fiscal theory; doves (search for similar items in EconPapers)
JEL-codes: D84 E31 E52 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2026-08-31
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Published in Annual Review of Economics, 31, August, 2026, 18, pp. 473 - 503. ISSN: 1941-1383

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