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Economics

Pandemic Fiscal Support Boosted Inflation, Fed Study Finds

A customer checks out at a grocery store in San Francisco, Calif.

A customer checks out at a grocery store in San Francisco, Calif.

Photographer: David Paul Morris/Bloomberg

Fiscal support enacted in many countries to support households during the Covid-19 pandemic helped to boost spending without increasing production, widening the mismatch between supply and demand and worsening inflation in some countries including the US, according to Federal Reserve research released on Friday. 

Spending and production both dropped off at the start of the pandemic as businesses closed and health restrictions required consumers to stay home. But fiscal aid enabled people to spend more on goods before there was a rebound in production, the researchers said.