A simple model points to a risk that US inflation takes longer to return to the 2% target than expected by the Fed because inflation dynamics have not returned to pre-COVID patterns, where the issue largely rests with services prices. This risk should not be overstated as dynamics could improve further, but is consistent with interest rates staying high for longer. One of the great successes of the Federal Reserve was bringing the high inflation of the 1970s and 1980s under control and locking in low inflation over the 1990s, 2000s, and 2010s. COVID challenged that success in the 2020s, with inflation surging to its ... (full story)