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Viewpoint
Why did almost nobody see inflation coming?
Forecasting inflation is a staple of macroeconomic modelling, yet virtually all economists’ predictions for the United States in 2021 were way off the mark. This dismal performance reflected a collective failure to take economic models seriously enough, as well as other analytical shortcomings
Jason Furman
19 Jan 2022
In 2008, as the global financial crisis was ravaging economies everywhere, Queen Elizabeth II, visiting the London School of Economics, famously asked, “Why did nobody see it coming?” The high inflation of 2021 – especially in the United States, where the year-on-year increase in consumer prices reached a four-decade high of 7% in December – should prompt the same question.
