The author is a senior researcher at Harvard Kennedy School

With the end of 2021, Team Transitory retreats in the United States.The rapidly accelerating inflation predicted by economists including the former Treasury secretary Lawrence Summers Olivier Blanchard, the former chief economist of the International Monetary Fund, has appeared.Consumer price Up 6.8% In the year to December, this was the fastest increase since 1982. By the December 15 meeting, even Fed policymakers who advised patience were worried. Minutes of the meetingThe report released last week showed that discussions on interest rate hikes and balance sheet reduction were faster than market expectations.

I will warn them not to give up their positions lightly. After spending trillions of dollars on financial support, by the end of last year, too much money may have chased too few commodities. But this year I think the situation will be reversed and growth and inflation will slow down.According to the Brookings Institution Fiscal impact measuresIn the first quarter of 2021, local, state, and federal tax and expenditure policies have increased US GDP growth by more than 7.5 percentage points. But the fiscal stimulus has since turned negative-it is expected to drag down the economy at least in the third quarter of 2023.These forecasts include new Infrastructure spending plan.

Even if part of it stagnates $1.75tn Rebuild better stimulation Actual government spending in 2022 will remain small, partially offset by tax increases.according to Office of Management and Budget, The budget balance in 2022 will fluctuate by nearly 9 percentage points compared to a year ago, which is the second largest reduction since records began in 1930. Some people believe that this fiscal cliff is simply the government handing over the baton that generates demand to consumers.Stimulating inspections, strengthening unemployment insurance, and expanding child tax credits increase personal savings More than $2tn, So the higher consumption provided can offset the financial drag.

Although the overall stock of savings is shocking, it is declining and has not been evenly distributed since the beginning. The personal savings rate has returned to the level of about 7% before the pandemic.According to data from the JPMorgan Chase Institute, low-income households have seen Maximum percentage return They save in fiscal measures, but their savings deplete faster. For low-income earners, the proportion of any income growth spent on consumption is usually higher than for the rich. The government cannot give the baton to people who have spent their savings.according to Moody’s analysis, The excess savings of working-class and middle-class families may be used up early this year. And those high-income consumers who haven’t spent all their savings won’t help.

The result may be weaker inflation.Unemployed respondents To a survey Indeed.com stated that their financial buffer is one of the three reasons why they are not in a hurry to find a job. As these savings diminish, many people who withdraw from the labor market will try to return, thereby increasing the labor supply and alleviating the pressure of rising wages, thereby alleviating the pressure of rising prices.

What about business investment? Even a limited Fed rate hike will increase borrowing costs in 2022. The 10-year U.S. Treasury bond yield is rising, and it is difficult to say that the investment environment will improve in 2022. The dollar will strengthen, depressing inflation and exports.

External demand may also be weak.China growth A sharp slowdown In the second half of 2021, part of it is to pursue financial stability. Although Beijing has stated that it will take more measures to support economic growth in 2022, long-term problems still exist. A series of defaults in the real estate industry is a major risk, and China’s zero coronavirus policy is also a major risk, which has prompted the closure and lockdown of new factories.

These may exacerbate the existing global supply chain disruption in early 2022. But there are other signs that supply pressure is easing.Order backlog and supply lead time it has been improved In recent months.According to the New York Fed’s new Global Supply Chain Stress Index, The supply chain problem “has reached its peak and may begin to ease in the future.” This will also lead to a slowdown in US inflation later this year.

The Fed may act faster and further than expected in early 2022 to maintain its credibility as an inflation fighter. But fiscal drag, shrinking savings and weak foreign demand may ease the overheated economy. This, as well as improving the supply chain, will reduce inflationary pressures. Summers and others are correct in 2021, but I see the balance tilt in six months. I want to register for another year to become a member of Team Transitory.