Inflation regimes
Place the moment, then pick the cure
Demand-pull, cost-push, expectations-driven, fiscal-dominant. Same headline number, four different causes, four different cures. Knowing which one you're in is the whole game.
The quadrant has two axes. Demand vs supply origin — is the impulse coming from spending exceeding capacity, or from supply shocks raising costs? Anchored vs unanchored expectations — are long-run expectations still near the target, or are households and firms re-pricing toward sustained higher inflation?
Demand-pull (anchored × demand) — 2018 US. Cure: gentle, well-telegraphed hikes. Anchored expectations do most of the work.
Cost-push (anchored × supply) — early 2022. Cure: wait it out, supply-side policy where possible. Hiking into a supply shock destroys output without curing prices.
Expectations-driven (unanchored × demand) — late 1970s. Cure: aggressive credibility move, front-loaded hikes, hawkish guidance. Volcker-style. Recession is the price.
Fiscal-dominant (unanchored × supply) — Argentina 2024. Cure: monetary policy alone can't fix this. Requires fiscal consolidation or currency reform.
The widget below has five history snapshots. Click each and watch the dot move and the cure change. Then try moving the drivers manually: if you push expectations and fiscal together, watch how fast the regime shifts from "manageable" to "Volcker required."
The cure that fits one quadrant is wrong in the others.
The most expensive mistakes in monetary policy come from applying the wrong quadrant's cure. The 1970s Fed hiked into mostly-supply shocks for years before Volcker eventually had to do the expectations-driven cure. The 2022 Fed did the opposite — read it correctly as supply-plus-fiscal early and adjusted.