Using a common method (Ball 1994) for estimating the recent output sacrifice ratio gives us a value of -0.04. That's not just small - many values are between 2-3 - but it actually has the wrong sign.
You're right that the supply shock matters, but a good supply shock can easily lead to a negative sacrifice ratio.
The fall in inflation without unemployment could be the combination of monetary tightening and a beneficial supply shock from the supply chain problems subsiding. For some graphs to go with this story, see:
Now do July 2008. What happened when CPI peaked at 5.6% after 4 years of elevated CPI?? Oh wait, the Fed uses core PCE and so elevated CPI is ignored…except they forgot to inform consumers! 😉
You're right that the supply shock matters, but a good supply shock can easily lead to a negative sacrifice ratio.
The fall in inflation without unemployment could be the combination of monetary tightening and a beneficial supply shock from the supply chain problems subsiding. For some graphs to go with this story, see:
https://gdubbbb.substack.com/p/the-mysterioustearless-disinflation
Now do July 2008. What happened when CPI peaked at 5.6% after 4 years of elevated CPI?? Oh wait, the Fed uses core PCE and so elevated CPI is ignored…except they forgot to inform consumers! 😉