There is a reason why mainstream economics has been driven into this
‘subjective’ corner in explaining and forecasting inflation. It’s
because previous mainstream theories of inflation have been proven
wrong. The main theory of the post-war period was the monetarist
one,which I have discussed before
<https://thenextrecession.wordpress.com/2020/08/17/covid-and-inflation/>.
Its basic hypothesis is that price inflation in the ‘real’ economy
occurs and accelerates if the money supply rises much faster than
production in an economy. Inflation is essentially a monetary phenomenon
(Milton Friedman) and is caused by central banks and monetary
authorities interfering in the harmonious expansion of the capitalist
economy.
But the monetarist theory has been proven wrong, particularly during the
COVID slump. During 2020, money supply entering the banking system rose
over 25% and yet consumer price inflation hardly budged and even slowed.
https://thenextrecession.wordpress.com/2021/05/09/inflation-and-financial-risk/
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