What role did supply-chain recovery and global factors play versus domestic policy in driving 2021–2025 price levels?

1. Global shocks lit the fuse: supply chains, energy and reopening demand

The initial surge in price levels followed a rapid recovery of demand after COVID lockdowns while supply chains, shipping chokepoints and labor constraints limited supply, producing sharp price increases in goods and energy; academic and policy pieces attribute the 2021–2022 acceleration to that aggregate demand–supply imbalance and pandemic‑related supply interruptions ^{[1] [2]}. Energy in particular was a major contributor — for example, energy inflation accounted for almost a third of U.S. inflation in 2021 according to the CFR tracker — and the 2022 Russia‑Ukraine war added a further energy and commodity shock that raised global headline inflation ^[2].

2. Research finds a dominant common factor, plus sectoral global trends

Quantitative work cited by the Federal Reserve’s Liberty Street Economics identifies one broad Global Inflation Trend (GIT) and two sectoral global trends — one for core goods and another for food and energy — that explain a large share of slow‑moving and persistent CPI dynamics across countries, implying that many inflation movements were driven by common international forces rather than solely domestic developments ^[3]. The Dallas Fed’s factor analysis reaches a similar conclusion: co‑movement of inflation across countries can be explained in part by global and regional factors amplified by integrated supply chains ^[4].

3. Domestic policy and country‑specific factors determined magnitude and persistence

While global forces moved many price series, domestic policy and idiosyncratic features determined how large and how persistent inflation became in each country: fiscal stimulus and expansions of money supply in 2020–2021 are commonly cited as domestic demand amplifiers, and differences in labor markets, market concentration, and policy responses help explain cross‑country variation ^{[1] [5]}. Sources also document that central banks initially viewed early price rises as temporary and only later tightened policy, which affected inflation trajectories ^{[1] [5]}.

4. Sectoral patterns show where global vs domestic forces dominated

Sector‑level evidence points to global drivers for goods and energy (the CG‑GIT and FE‑GIT described by Liberty Street Economics), while services inflation often reflected more domestic factors such as wage growth, local labor shortages, and sectoral market structure — explaining why some components of CPI fell faster than others as global bottlenecks eased ^{[3] [5]}. Journalistic and research accounts note that energy and goods inflation were especially sensitive to global trade frictions and supply chains, while services were more sensitive to domestic labor markets ^{[2] [5]}.

5. Timing matters: 2021 surge vs 2023–2025 moderation

The sharp spike in 2021–2022 is tied to pandemic reopening and supply disruptions; by 2023–2025 inflation moderated as some supply chains recovered and central banks tightened, but the pace and extent of disinflation differed across countries because global pressures abated unevenly and domestic policy responses diverged ^{[1] [4] [3]}. Empirical trackers and databases compiled by institutions like the World Bank and IMF underpin this narrative of an initial globally synchronous shock followed by more heterogenous national paths ^{[6] [7]}.

6. Competing narratives and open questions

Some analysts emphasize global common factors as primary drivers and urge policymakers to consider international developments when setting policy ^{[4] [3]}. Others highlight domestic fiscal and monetary choices, corporate concentration, and labor market dynamics as crucial amplifiers of inflation and its persistence ^{[1] [5]}. Available sources do not provide a single, definitive decomposition of the exact percentage split between global and domestic contributions for every country; the literature instead points to a substantial global component plus materially important domestic amplifiers ^{[3] [1]}.

7. Practical takeaway for policymakers and observers

Policymakers should treat inflation as partly a global phenomenon — monitoring commodity markets, trade disruptions and common global trends — while also using domestic tools (monetary policy, fiscal calibration, competition policy, labor‑market measures) to address country‑specific drivers and distributional effects; multiple sources argue for a balanced approach that recognizes both international correlations and domestic levers ^{[4] [1] [3]}.

Limitations: this synthesis uses the provided sources only and does not attempt a new quantitative decomposition; detailed country‑level splits and updated data series would require consulting the underlying datasets and recent WEO/central bank reports ^{[7] [6]}.