Money and psychology of inflation: an investor view

Inflation was the big surprise in 2021. At the beginning of the year, the average US inflation forecast by economists for the end of 2021 was around 2%, while the latest reading in December came in at 7.0% YoY, the highest level since 1982. Psychological forces could have played a major role in underestimating inflation. Today, few people have memories of the ‘70s great inflation period (less than 25% of the US population is aged 55 years and above).