Adriana Kugler on the Puzzle of Uncertainty and Inflation
Ask ten economists whether uncertainty pushes inflation up or down, and you may get several confident, contradictory answers. The disagreement itself turns out to be the more interesting finding. Ask ten economists whether rising uncertainty pushes inflation higher or lower, and you will likely get several different, well-supported answers. That is the strange state of one of the more pressing questions in macroeconomics today. I have returned to this question repeatedly in my academic work and in venues like my 2025 Whittington Lecture at Georgetown's McCourt School , and the honest answer is that the literature on what drives inflation does not converge on one story. The spread of findings is striking. Some papers find uncertainty pushes inflation down. Others find it pushes inflation up. A few find no measurable effect at all. One rigorous study traces consumer uncertainty through what economists call a real-options channel: uncertain consumers pull back, firms hold off on hirin...