Some inflation scenarios for the American Rescue Plan Act of 2021

Abstract: The American Rescue Plan Act (ARP) signed into law on March 11, 2021, authorized approximately $1.9 trillion in federal government spending. ARP is widely expected to boost economic growth over the next two to three years—and significantly so early on. The upswing in growth is likely to increase resource pressures and therefore consumer price inflation as well. The potential for this channel to raise inflation substantially has attracted the attention of economic commentators, including Olivier Blanchard and Lawrence Summers. But the magnitudes and persistence of the possible increases in inflation are often left unsaid. In this article, we take a closer look into the effects ARP may have on inflation.

JEL Classification: E00; E31; E52; E62;

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Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Chicago Fed Letter

Publication Date: 2021-04-13

Issue: 453

Pages: 8