Skepticism around the return of core inflation to central banks’ 2% target remains pervasive despite good news in some key locales.

In the US, the latest update on consumer price growth did indeed suggest that underlying, trend inflation may be on track to moderate, and there was tentative evidence of progress out of the UK this week, but core CPI was revised higher for the eurozone, underscoring the uphill nature of the battle.

The simple figure below underscores the point. Core is barely off the highs in the UK and Europe, and it’s still double target in the US and Canada.

Of course, we’re in the era of “trimmed,” “core, core,” “supercore” and so on. Plain old “core CPI” isn’t good enough anymore. It reminds me of the old Jerry Seinfeld joke about over-the-counter pain relievers: “Nobody wants anything less than extra strength. Extra strength is the absolute minimum. You can’t even get ‘strength.’ ‘Strength’ is out. Some people aren’t satisfied with ‘extra’ they want ‘maximum.'” It’s the same thing with modified measures of underlying inflation. Nobody wants anything less than “trimmed.” Some people aren’t satisfied with “trimmed,” they want “super.”

In any event, all belabored attempts to hone in on the “true” trajectory of underlying price growth aside, the bottom line is that across a lot of developed markets, inflation for many key categories of services remains uncomfortably high. And annoyingly stubborn.

In many corners, the scapegoat for that undesirable state of affairs remains fiscal policy or, I should say, the fiscal policy kicker on top of monetary largesse. In his latest, BofA’s Michael Hartnett pointed to the relatively small reduction in the global stock of QE.

The implication from the figure above is that the liquidity withdrawal from 2022 forward may not be sufficient to curb risk assets for long, and shouldn’t necessarily be expected to curb inflation either to the extent the fiscal impulse effectively acted as a match on $30 trillion of dry kindling.

To be clear, it’s not possible to describe precisely how the transmission mechanism worked here. We know a drop in the velocity of money in the aftermath of the financial crisis, alongside consumer retrenchment and fiscal austerity in some locales, worked at cross purposes with central banks’ efforts to reflate. And we know the COVID-era “partnership” between fiscal and monetary policy contributed to the resurgence of long-dead inflation in advanced economies. But it’s not clear whether it makes sense to posit any direct link between the legacy stock of QE and the inflation of the 2020s.

Coming back to the fiscal scapegoat, Hartnett illustrated the point with a handy table tallying the scope of measures adopted over the past three years.

On the left, you can see fiscal measures offsetting the withdrawal of monetary stimulus. On the right is the COVID response: Double-barreled, complimentary easing.

“$13 trillion of QE post-COVID has been super-charged by an additional $15 trillion of US/EU/Japan fiscal policy stimulus,” Hartnett wrote, noting that demand-side stimulus may mean core CPI stays between 4-5% even as easing supply chains and other post-pandemic normalization helped headline price growth “roundtrip” from 2% to 9% back to 3%.

As I never tire of reminding readers, the socioeconomic environment has shifted. Voters in developed markets are going to demand more from fiscal policy going forward. And that’s to say nothing of the costs associated with rearmament and the energy transition, both of which are imperative.