Inflation was red hot in May. The consumer price index (CPI) rose by 1% in that month alone, and was up 8.6% year-over-year. These numbers dashed hopes (including mine) of a cool down in prices, perhaps with inflation peaking in March. Unfortunately, that’s not happening. A key macroeconomic question remains: Is high nominal wage growth driving inflation higher?
Until recently, the answer has been pretty clearly ‘no.’ The recent price acceleration can be largely attributed to goods prices. During the pandemic, as consumers shifted their consumption away from services (haircuts, restaurant meals, etc.) to goods (vehicles, furniture, etc.), and