What has been driving inflation? Economists' thinking may have changed : Planet Money Economists say that inflation is just too much money chasing too few goods.

But something else can make inflation stick around.

If you think of the 1970s, the last time the U.S. had really high sustained inflation, a big concern was rising wages. Prices for goods and services were high. Workers expected prices to be even higher next year, so they asked for pay raises to keep up. But then companies had to raise their prices more. And then workers asked for raises again. This the so-called wage-price spiral.

So when prices started getting high again in 2021, economists and the U.S. Federal Reserve again worried that wage increases would become a big problem. But, it seems like the wage-price spiral hasn't happened. In fact wages, on average, have not kept up with inflation.

There are now concerns about a totally different kind of spiral: a profit-price spiral. On today's show, why some economists are looking at inflation in a new light.

This episode was produced by Sam Yellowhorse Kesler and engineered by Katherine Silva, with help from Josh Newell. It was fact-checked by Sierra Juarez and edited by Jess Jiang.

Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in
Apple Podcasts or at plus.npr.org/planetmoney.

What has been driving inflation? Economists' thinking may have changed

What has been driving inflation? Economists' thinking may have changed

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LOIC VENANCE/AFP via Getty Images
A picture taken on February 24, 2016 shows a spiral staircase in Nantes, western France. / AFP / LOIC VENANCE (Photo credit should read LOIC VENANCE/AFP via Getty Images)
LOIC VENANCE/AFP via Getty Images

Economists say that inflation is just too much money chasing too few goods.

But something else can make inflation stick around.

If you think of the 1970s, the last time the U.S. had really high sustained inflation, a big concern was rising wages. Prices for goods and services were high. Workers expected prices to be even higher next year, so they asked for pay raises to keep up. But then companies had to raise their prices more. And then workers asked for raises again. This the so-called wage-price spiral.

So when prices started getting high again in 2021, economists and the U.S. Federal Reserve again worried that wage increases would become a big problem. But, it seems like the wage-price spiral hasn't happened. In fact wages, on average, have not kept up with inflation.

There are now concerns about a totally different kind of spiral: a profit-price spiral. On today's show, why some economists are looking at inflation in a new light.

This episode was produced by Sam Yellowhorse Kesler and engineered by Katherine Silva, with help from Josh Newell. It was fact-checked by Sierra Juarez and edited by Jess Jiang.

Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.

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Music: "Razor Blade Disco," "Inside Job," and "Roller Disco."