Inflation! It’s been the dominant economic story of the last two years, and there have been some mixed signals in recent months about where things will go from here and what the appropriate course of action for policymakers is. So today I’d like to break down where things stand now, the arguments for both dovish and hawkish policy, and where things might go from here.

To (very) briefly summarize the last two years of economic news, Congress passed several major stimulus bills in 2020 and 2021 due to fears of a pandemic-induced depression and of repeating the mistakes made after the 2009 financial crisis. Separately, the Federal Reserve decided that they had been underrating the full employment part of the dual mandate while overreacting to the risk of inflation and decided to adopt the “flexible average inflation targeting” (or FAIT) framework in their 2020 review.

Prices began rising in early 2021 and have continued to do so since. Dovish observers argued that this inflation was tra…