Inflation decelerated again in June, bringing further relief to consumers’ wallets.

The consumer price index rose 3% in June 2024 from June 2023, down from a 3.3% annual inflation rate in May, the Bureau of Labor Statistics reported Thursday.

While inflation isn’t quite yet back to policymakers’ long-term target around 2%, it has cooled significantly from about 9% two years ago, the highest level since 1981.

But why did inflation initially take off?

The first U.S. presidential debate last month saw both candidates — President Joe Biden and former President Donald Trump — blame each other for inflation-related grievances during the pandemic era.

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“He caused the inflation,” Trump said of Biden during the June 27 debate. “I gave him a country with no, essentially no inflation,” he added.

Biden countered by saying inflation was low during Trump’s term because the economy “was flat on its back.”

“He decimated the economy, absolutely decimated the economy,” Biden said.

But the cause of inflation isn’t so black and white, economists say.

In fact, Biden and Trump are not responsible for much of the inflation consumers have experienced in recent years, they said.

Likewise, the Covid-19 pandemic plunged the U.S. into a severe recession during Trump’s tenure, pulling the consumer price index to near zero in spring 2020 as unemployment ballooned and consumers cut spending.

“In my view, neither Trump nor Biden is to blame for the high inflation,” said Mark Zandi, chief economist at Moody’s Analytics. “The blame goes to the pandemic and the Russian war in Ukraine.”

China shut down factories and cargo ships couldn’t be unloaded at ports, for example, reducing the supply of goods.

Meanwhile, consumers changed their buying patterns.

They bought more physical stuff such as living room furniture and desks for their home offices as they spent more time indoors — a departure from pre-pandemic norms, when Americans tended to spend more money on services such as dining out, travel, and going to movies and concerts.

High demand, which boomed when the U.S. economy reopened broadly, coupled with goods shortages fueled higher prices.

There were other related factors, too.

For example, automakers didn’t have enough semiconductor chips necessary to build cars, while rental car companies sold off their fleets because they didn’t think the recession would be short-lived, making it pricier to rent when the economy rebounded quickly, Wessel said.

As Covid cases were hitting record highs heading into 2022, further disrupting supply chains, Russia’s war in Ukraine “supercharged” inflation by stoking higher prices for commodities such as oil and food around the world, Zandi said.

As a result, global inflation hit a level “higher than seen in several decades,” the International Monetary Fund wrote in October 2022.

“We only have to look at the still high inflation rates in most other advanced economies to see that most of this inflation period was really about global trends … rather than about the specific policy actions of any given government (though they did of course play some role),” Stephen Brown, deputy chief North America economist for Capital Economics, wrote in an e-mail.

For example, the American Rescue Plan — the $1.9 trillion stimulus package Biden signed in March 2021— offered $1,400 stimulus checks, enhanced unemployment benefits and a larger child tax credit to households, in addition to other relief.

The policy led to “some good things,” such as a strong job market and low unemployment, said Michael Strain, director of economic policy studies at the American Enterprise Institute, a right-leaning think tank.

But its magnitude was greater than the U.S. economy needed at the time, serving to raise prices by putting more money in consumers’ pockets, which fueled demand, he said.

“I do think President Biden bears some responsibility for the inflation that we’ve been living through for the past few years,” Strain said.

He estimated the American Rescue Plan added about 2 percentage points to underlying inflation. The consumer price index peaked at 9.1% in June 2022, the highest since 1981. It’s since declined to 3%.

The Federal Reserve — the U.S. central bank — aims for a long-term inflation rate near 2%.

“I think if it weren’t for the American Rescue Plan, the U.S. still would have had inflation,” Strain added. “So I think it’s important not to overstate the situation.”

However, Zandi viewed the ARP’s inflationary impact as “good” and “desirable,” bringing the economy back to the Fed’s long-term target inflation rate after a prolonged period of below-average inflation.

Trump had also authorized two stimulus packages, in March and December 2020, worth about $3 trillion.

These so-called “fiscal policy” responses were insurance against a lousy economic recovery, perhaps overshooting after the U.S.’ lackluster response to the Great Recession that mired the nation in high unemployment for years, Wessel said.

That the U.S. issued perhaps too much stimulus was the presidents’ fault but “only clear in hindsight,” he said.

Biden and Trump also enacted other policies that may contribute to higher prices, economists said.

For example, Trump imposed tariffs on imported steel, aluminum and several goods from China, which Biden largely kept intact. Biden also set new import taxes on Chinese goods such as electric vehicles and solar panels.

The central bank uses interest rates to control inflation. Increasing rates raises borrowing costs for businesses and consumers, cooling the economy and therefore inflation.

The Fed has raised rates to their highest in about two decades, but was initially slow to act, economists said. It first increased them in March 2022, about a year after inflation started to spike.

It also waited too long to throttle back on “quantitative easing,” Strain said, a bond-buying program meant to stimulate economic activity.

“That was a mistake,” Zandi said of Fed policy. “I don’t think anyone would have gotten it right given the circumstance, but in hindsight it was an error.”

Some observers have also pointed to so-called “greedflation” — the notion of corporations taking advantage of the high-inflation narrative to raise prices more than needed, thereby boosting profits — as a contributing factor.

It’s unlikely this was a cause of inflation, though it may have contributed slightly, economists said.

“To the extent anything like that happened — which I’m not sure it did — this would be a very minor factor in the inflation we had,” said Strain. He estimates the dynamic would have added well less than 1 percentage point to the inflation rate.

“Companies always look for an opportunity to raise prices when they can,” Wessel said. “I think they took advantage of the inflationary climate, but I don’t think they caused it.”