causes of and responses to today's inflation.

This article analyzes the recent surge in inflation, concluding that it is predominantly driven by supply-side shocks—including pandemic-induced supply chain disruptions, the war in Ukraine, sectoral demand shifts, and increased market power among firms—rather than by excess aggregate demand or excessive pandemic fiscal spending. It finds that aggregate demand remained largely below potential output during the inflationary period, and that labor market indicators do not support the existence of a wage–price spiral. The paper argues that aggressive interest rate hikes are unlikely to effectively reduce inflation and may worsen economic conditions and inequalities, advocating instead for targeted fiscal and regulatory policies that address specific supply constraints and market power. It also highlights that inflation trends are global and not unique to the United States, reinforcing the supply-side explanation. Overall, the authors recommend a measured monetary policy response combined with fiscal interventions to resolve sectoral bottlenecks and support vulnerable populations.