Stimulus spending played a "sizable role" in driving inflation to 40-year highs in the wake of the COVID-19 pandemic.
"We find that excess inflation is significantly correlated to each country's own domestic stimulus and to various exposures of foreign stimulus," concluded a trio of economists at the St. Louis Federal Reserve in a report published last month. In the U.S., they found that "fiscal stimulus during the pandemic contributed to an increase in inflation of about 2.6 percentage points."
