Central bankers and most economists failed to anticipate the sharp increase in inflation that started in 2021, and public policymakers were slow to respond after insisting price pressures were “temporary,” a new paper co-authored by former Federal Reserve Chair Ben Bernanke stated.
The Fed misjudged the economic impact of pandemic-era fiscal programs, which explains why many had failed to accurately forecast the inflation that resulted from the stimulus and relief measures, including the March 2020 $2.2 trillion CARES Act, the December 2020 package that consisted of $900 billion in COVID-related spending, and the March 2021 $1.9 trillion American Rescue Plan.
The CARES Act, signed by former President Donald Trump, was sufficient enough to strengthen businesses’ and households’ balance sheets and support their ability to spend in the future, the paper purported….