Economists spent 2021 expecting inflation to prove “transitory.” They spent much of 2022 underestimating its staying power. And they spent early 2023 predicting that the Federal Reserve’s rate increases, meant to cure the inflation, would plunge the economy into a recession.
None of those forecasts have panned out.
Rapid inflation has now been a fact of life for 30 consecutive months. The Fed has lifted rates above 5.25 percent to hit the brakes on price increases, but the economy has remained surprisingly strong in the face of those moves. Americans are working in greater numbers than predicted, and recent retail sales data showed that consumers are still spending at a faster clip than just about anyone expected. For now, there is no economic downturn in sight.
The question is why experts so severely misjudged the pandemic and postpandemic economy — and what it means for policy…
