In April 2021, the Federal Reserve Board — an institution that employs more than 400 PhD economists — told the American public that rising inflation was "transitory." By June 2022, headline CPI had hit 9.1%. Those same forecasters had been wrong by an average of 2.57 percentage points through 2021–2023. The preceding decade offered no comfort: they'd overpredicted inflation by an average of 0.54 percentage points from 2012 to 2020. The direction of the error changed. The overconfidence didn't.
To be precise about what the Fed got wrong: it wasn't the cause of the price surge — it was the diagnosis. Supply chains fractured by panicked government responses don't produce monetary inflation. Instead, they result in a lack of hands and machines working together. Higher prices are the logical effect of such a scenario, though they have nothing to do with inflation.
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