I do not believe that the inflation we are seeing today is like the extended period of the 1970s. That period had more to do with profound and lasting global changes such as the end of cheap oil, and today’s inflation is caused by a series of “one offs.”
COVID temporarily stopped economies dead in their tracks. In the U.S. shortages developed because of panic buying of items like toilet paper. People began to stock up on meat due to overblown press reports that the processing plants were riddled with COVID and might have to close. That led people to buy freezers to store their meat resulting in a further shortage of freezers.
Most appliances are either Chinese imports or contain many necessary parts that are of Chinese origin. China’s Zero COVID policy, in turn, closed manufacturing plants making appliances and appliance components. Examples of other similar situations, such as a shortage of chips used in the manufacture of new cars, resulted in previously owned cars becoming more valuable since new cars could not be produced without access to the chips.
While the U.S. opened for business much sooner than the rest of the world, there were still many working Americans that needed government help. The help was applied with a shotgun approach instead of a more targeted one. This, along with those who were able to work from home and never experienced much financial impact, resulted in too much money chasing too few goods.
The war in Ukraine disrupted the oil and grain markets. Within the energy sector, the disruption became worse by, in my opinion, different producers and middlemen taking advantage of a volatile situation. If not quite price gouging and manipulation, then close. Both oil and grain markets probably have seen their peaks. Prices have started to fall.
There is a worker shortage. Statistically there are almost two positions for every job seeker. Many have fallen out of the job market. Along with an end to both legal and illegal immigration, we just do not have enough people to make our economy work.
The Fed should not raise interest rates too fast to cure an inflationary economy that has seen its peak or will soon do so. Prices will stabilize. We will probably have a brief but mild recession that, by the end of next year, will be a memory. Inflation may take a year longer to get to 2–3% range once again.