Financial shocks can impact inflation rates, especially during economic downturns like the Great Recession. By analyzing US data, researchers found that negative financial shocks can actually increase inflation temporarily. This unexpected result helps explain why inflation didn't drop as much after the financial crisis. Essentially, higher borrowing costs following financial shocks can lead to only a small decrease in inflation. This suggests that financial shocks act as supply-type shocks, affecting output and inflation in opposite ways, making it harder for central banks to balance their goals.