Why Is Inflation So High? Why Was 2008 Different?

Abstract

There's a lot of uncertainty surrounding the economy, real estate market, and the role of inflation in the economic environment. Typically, a cycle results in a downturn after economic growth leads to inflation, triggering the Federal Reserve to raise interest rates. A rise in interest rates makes it more costly to borrow and more beneficial to save, so people stop spending, start saving, and the economy slows down, which alleviates inflation. We weren't seeing much inflation, so interest rates stayed relatively steady for much of the decade, and things kept chugging along. Why is Inflation as High as It is Now? We came dangerously close to a severe economic catastrophe in 2008. What's the difference between then and now? Why was inflation at 2% for much of the decade after the Great Recession and now at 8% a year after this latest round of interest rate drops and money printing? Inflation is all about supply and demand, so there are really two sides to inflation. Why is Inflation Higher Now Than It Was After the Great Recession? In 2008, the Fed and the Treasury infused a lot of liquidity/money into the economy.