Europe measures inflation using something called HICP—the Harmonized Index of Consumer Prices. This is measured a bit differently than CPI in the United States, but luckily the BLS calculates an unofficial HICP index for the US every month. This allows an apples-to-apples comparison of inflation in the US and Europe. Here it is:
It should surprise no one that inflation is pretty closely matched. In particular, our recent inflationary surge happened almost identically in Europe with a lag of a few months. This is why you shouldn't pay much attention to anyone who suggests there was some kind of unique American action that caused inflation. It was a worldwide phenomenon and that points in pretty much one direction: COVID.
It wasn't Joe Biden's stimulus. It wasn't greedy American companies. And it wasn't anything special about our response to COVID. It was supply constrictions caused by the pandemic combined with government actions to keep incomes stable. Reduced supply + stable demand = inflation. Simple.
"it wasn't ..." seems to overstate the case
i think trump's stimulus, biden's stimulus, greedflation, and supply chain issues were all contributing factors
i think you could also make a case for temporal effects; supply chains early on, stimulus in the middle, greedflation/sticky prices at the end
If Europe's inflation curve is almost identical to the U.S., then Biden's stimulus couldn't have been much of a contributor.
The problem is that the Fed will take credit when doing nothing would have had the same result. Now admittedly, the rates were perhaps too low so a rate increase was due, but as to why the Fed announced they will be doing just one rate cut this year simply makes no sense (unless it is a 75 basis point cut).
If the cuts didn't result in bringing down exogenous inflation, it nonetheless prevented cyclical inflation -- the normal Philips Curve -- from setting in while resetting interest rates. When the time comes, the Feds will be able to prevent or moderate a recession or two rather than resort to negative interest rates (which inherently favors the rich and those whose income solely comes from capital gains) or forcing Congress to spend trillions.
If you can't raise rates at a time when the economy is hot, when can you? And if you can't, wouldn't that mean that our economy was structurally broken?
What's really needed is the undoing of Trump's tax cut and a lowering of the rates by the Fed.
The Eed does the quantitative easing when there's not enough stimulus by Congress during down turns. Keeping rates high now is because Congress is not taxing enough during good times.
What Phillips curve?
https://www.federalreserve.gov/econres/feds/files/2022028pap.pdf
At the same time then, we also shouldn't pay too much attention to anyone who suggests there was some kind of unique American action that brought-down inflation.
True. The only thing uniquely American was the size of the stimulus which helped us rebound faster and stronger than everyone else.
Though the war in Ukraine, dependence on Russia for natural gas and various migrant crises hindered the EU's recovery, so maybe not a fair comparison.
Europe had their own stimulus. I suppose you'd have to compare individual stimulus plans and inflation to see who did better or worse.
Pretty much every rich country used stimulus to prop up their economies and then had a rise in inflation. Stimulus after an economic shock is the norm for rich countries.
It is possible that inflation was entirely supply related. But it's also possible that the stimulus packages played a role. It's rare to have some sectors hit super hard while others do just fine, but then give stimulus to everyone. Most recessions don't end up making a huge proportion of the population richer, but many, many people were flush with cash in 2022.
I think that if we had to do it again, I'd want lots of support for people who got laid off and businesses that were hit hard. But maybe not checks to everyone.
I didn't get a check. Happy now?
If it was COVID, why would there be a few months' lag?
Everything kind of stopped with covid, and demand for a lot of items plummeted. It was only when stimulus packages took hold that people felt comfortable spending again.
I think Kevin's point is extremely important and needs to get repeated over and over again. While countries in Europe had slightly different fiscal and monetary policies they still ended up with the same spike in inflation. So many Trump supporters blame Biden for inflation without specifying what exactly Biden did that allegedly caused inflation. Our fiscal policy played very little role in the inflation spike we got although it is probably the case that they allowed us to recover from unemployment faster. Since poll after poll shows that the "undecided" think the economy is their biggest concern and what they mean by that seems to be inflation, Biden needs to hammer home the fact that our inflation was no worse than Europe's and we recovered faster. The inflation spike was not caused by our fiscal policies.
How do we know that printing American dollars wouldn't cause inflation, with a lag, in Europe? E.g. Americans are bidding up the price of imports with their dollars, raising prices overseas. And the American dollars flow to workers in foreign countries, allowing them to bid up prices for local goods that aren't exported.
Of course it was Covid, but I'm kinda interested in the weeds...