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How Much Do Supply and Demand Drive Inflation? – Federal Reserve San Francisco
- SkyMarshal 4y agoGood find. TLDR: ~50% of inflation is supply-driven, ~30% is demand-driven, and ~20% is from ambiguous factors. They’re basically trying to communicate to Washington that reducing money supply and raising interest rates to weaken demand can only reduce inflation by ~30%. Fully killing inflation will depend on economic and fiscal policies that increase supply (especially of energy and food). The unstated implication is that without the latter, rising interest rates may cause a recession without ending inflation, and we’ll get stagflation again like in the 70s. Increasing supply is critical to avoiding that.