Supply constraints, exacerbated by Russia’s war in Ukraine this year, account for about half of the surge in US inflation, with demand currently making up a third of the increase, according to new research from the Federal Reserve Bank of San Francisco.
“These results showing that factors other than demand account for about two-thirds of recent elevated inflation highlight some risks for the economy,” Adam Hale Shapiro, an economist at the San Francisco Fed, wrote in a letter published Tuesday. “Because supply shocks raise prices and suppress economic activity, the prevalence of supply-related factors raises the risk of entering a period of low growth and elevated inflation levels.”
