Why Is U.S. Inflation Higher than in Other Countries? - San Francisco Fed

Problems with global supply chains and changes in spending patterns due to the COVID-19 pandemic have pushed up inflation worldwide.

Since the first half of 2021 , U.S. inflation has increasingly outpaced inflation in other developed countries.

Estimates suggest fiscal support measures designed to counteract the severity of the pandemic’s economic effect may have contributed to this divergence.

Using the Phillips curve logic, we can reasonably compute the effect of pandemic support measures on the inflation forecast.

The idea is to compare countries that, like the United States , introduced aggressive support measures, versus the less aggressive, or policy “passive,” group before and after the pandemic.

U.S. households experienced significantly higher increases in their disposable income relative to their OECD peers.

The U.S. is experiencing higher rates of inflation than other advanced economies.

We argue that sizable fiscal support measures aimed at counteracting the economic collapse due to the COVID-19 pandemic could explain about 3 percentage points of the recent rise in inflation.

Without these spending measures, the economy might have tipped into outright deflation and slower economic growth.