Expert perspective

The coming drivers of inflation

March 04, 2021

Joe Davis

Vanguard Global Chief Economist

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A real threat of persistent higher inflation
The illustration’s top panel shows the U.S. core Consumer Price Index having dipped below trend in 2020 and returning toward its pre-COVID-19 trend in 2021. The illustration’s bottom panel shows our forecast for U.S. core CPI reaching 2.9% in May and June 2021 before receding.
Higher core inflation under most scenarios
The illustration shows increasingly higher core inflation through 2022, to 2.3% in our downside scenario, 2.6% in our baseline scenario, 2.8% in our upside scenario, and 3.0% in our “go big” scenario.

1 Our model accounts for annual fiscal spending on a net, or unfunded, basis. The extent to which tax increases might fund spending could change our growth assumptions and limit our model's inflation.

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