Why Inflation Spiked after 2020 – Questions Addressed

After four decades of low inflation in the U.S, the trend significantly reversed in early 2020 as COVID-19 spread across the globe creating various market problems and causing prices for goods and services to rise. Following in-depth research by the National Bureau of Economic Research, the working paper “Understanding U.S. inflation during the COVID era” was released to address questions about the cause of the spike in inflation since 2020. Simply explained, the rise in core inflation (the all-items index less food and fuel) was caused by a tight labor market with the rise in the ratio of job vacancies to unemployment contributing almost one-third of the rise in core inflation; while headline inflation (the all-items index including food and fuel) deviated from core because of sharp rise in energy and auto prices, and supply chain problems; and the pass-through of these unexpected headline shocks further magnified the rise in core inflation.

Source:    https://www.bls.gov/opub/mlr/2023/beyond-bls/what-caused-inflation-to-spike-after-2020.htm