Over the past few weeks I’ve been writing a series of articles about inflation and theories of inflation, and how and why those theories have changed over time. I’m not done yet — we’re only up to the late 1950s and Milton Friedman has only just made his appearance — but I think it’s worth pausing to take stock of the current inflation situation. What can those theories, and that history, tell us about the post-COVID outbreak of inflation we’re still dealing with today?

Last Friday, we got a new batch of inflation data, along with a few other key metrics, and the news was bad: the front-page headline in Saturday’s New York Times was, “Measure of Inflation Speeds Up, Muddling Hope of Easy Recovery.” The measure in question is the price index for household purchases — the Personal Consumption Expenditures, or PCE, price index — whose annualized growth rate jumped to 7.7% in January, compared to 2.4% the previous month. Core PCE, the Fed’s preferred inflation metric, which strips out food and energy prices, also jumped, rising to a 7.1% annualized rate, compared to 2.6% the previous month.

The Times write-up was gloomy: “There was a moment, late last year, when everything seemed to be going according to the Federal Reserve’s plan: Inflation was slowing, consumers were pulling back and the overheated economy was gently cooling down. But a spate of fresh data, including worrying figures released Friday, make it clear that the road ahead is likely to be bumpier and more treacherous than expected.”