It has also begun tapering asset purchases, which is intended to reduce spending by lowering the amount of money in circulation. This encourages people to spend less and save more. To combat inflation, the Federal Reserve is looking to raise interest rates. Federal Reserve measures inflation using Personal Consumer Expenditures (PCE). Note: The OECD and IMF measure inflation with the Consumer Price Index (CPI), whereas the U.S. Over the next few years, various institutions expect the inflation rate in the U.S. Forecasting the Inflation Rate in the U.S. For instance, the price of used cars and trucks has risen over 37% as the semiconductor shortage hampers the production of new vehicles. The lack of supply is leading to higher material and wage costs for businesses, with some categories hit particularly hard. Total private job openings increased from 6.2 million in February 2020 to 9.6 million in November 2021. Not only that, there is a severe labor shortage. Retailers can cover just over one month of sales from existing inventories, down 25% compared to February 2020. To make matters worse, business inventories are at record lows. Compared to February 2020 levels, demand for goods in December 2021 was 22% higher. It remained high even after demand for services recovered.
Inflation During a COVID-19 RecoveryĪmid lockdown restrictions, demand for goods increased dramatically. A number of factors are responsible, including surging consumer demand, supply chain problems, and a labor shortage. was unable to increase supply to meet demand, and OPEC countries had more power to influence oil prices.įast forward to 2021, and the COVID-19 recovery has again led to a higher inflation rate in the United States. oil producers didn’t have additional capacity and non-OPEC oil sources were declining as a proportion of the world oil market. The early ‘70s were impacted by the oil embargo, when OPEC countries stopped oil exports to the United States. In the years that followed, surging oil prices were a primary culprit behind periods of higher inflation. President Nixon implemented wage-price shocks to halt inflation, but this eventually caused a recession. For instance, a booming economy in the late ‘60s led to rising prices. There are a number of periods in history where the inflation rate in the U.S. Here’s what the inflation rate in the U.S. The data shows the year-over-year change from December of the prior year and is not seasonally adjusted. We measured inflation using data from the Consumer Price Index, which measures the change in price that urban consumers pay for a basket of goods and services. The History of the Inflation Rate in the U.S.
This is different from the other inflationary periods over the past 50 years, where rising energy prices led to cost-push inflation. We are currently experiencing both cost-push inflation and demand-pull inflation. Supply declines due to higher demand, which means consumers are willing to pay more and prices rise.
In this graphic from New York Life Investments, we look back at historical inflation-and where experts think it may be headed next. This marks the highest level in 40 years. has surged, reaching 7% year-over-year in December 2021. View the high resolution version of this infographic.
The Inflation Rate in the U.S.: Past, Present, and Future