What Is Inflation? Definition, Causes, and How It Affects Your Money
Author: Meesam Abbas | Last Updated: June 2026 | Sources: Bureau of Labor Statistics, Federal Reserve, Congressional Budget Office, Brookings Institution, Statistisches Bundesamt, Office for National Statistics
Inflation is the rate at which the general price level of goods and services rises over time — and as of May 2026, it is running at 4.2% in the United States, more than double the Federal Reserve's 2% target and the highest level in three years. (Bureau of Labor Statistics, June 2026) What is inflation doing to your purchasing power right now, what is causing it, and what does it mean for your savings, your mortgage, and your investments? This article answers all of it — with current data and no jargon.
Key Takeaways
- Inflation is the overall general upward price movement of goods and services in an economy, measured monthly by the Bureau of Labor Statistics through the Consumer Price Index. (Bureau of Labor Statistics, 2026)
- US headline CPI inflation reached 4.2% year-over-year in May 2026 — the highest in three years — while core CPI excluding food and energy rose 2.9%. (Bureau of Labor Statistics via CNBC, June 2026)
- Federal Reserve research confirmed in April 2026 that Trump tariffs implemented in 2025 explain the entirety of excess inflation in core goods since January 2025 — without them, inflation would have fallen to pre-pandemic levels. (Federal Reserve, April 2026)
- The Congressional Budget Office estimated that 2025 tariff policies will increase the PCE price level by 0.9% by 2026, adding directly to consumer costs across the entire economy. (Congressional Budget Office, June 2025)
- US inflation at 4.2% in 2026 is significantly higher than Germany at 2.7% and the UK at 3.4% — making the United States an outlier among major economies, largely due to tariff-driven price increases. (Statistisches Bundesamt, April 2026; ONS, March 2026)
- US headline CPI (May 2026): 4.2% year-over-year — Bureau of Labor Statistics, June 2026
- US core CPI excluding food and energy (May 2026): 2.9% year-over-year — BLS via CNBC, June 2026
- US PCE inflation (April 2026): 3.8% year-over-year — Federal Reserve Dallas Fed, May 2026
- US core PCE excluding food and energy (April 2026): 3.3% year-over-year — Federal Reserve Dallas Fed, May 2026
- Federal Reserve inflation target: 2% (PCE), formally adopted January 2012 — Federal Reserve, 2025
- Peak US CPI during 2021–2023 surge: 9.1% in June 2022 — Bureau of Labor Statistics, July 2022
- CBO estimate: tariffs will raise PCE price level by 0.9% by 2026 — Congressional Budget Office, June 2025
- Germany CPI (March 2026): 2.7% — Statistisches Bundesamt, April 2026
- UK CPI (December 2025): 3.4% — Office for National Statistics, March 2026
- Canada CPI (February 2026): 1.8% — Statistics Canada, March 2026
Why Inflation Matters
Inflation is not an abstract economic concept — it has direct, measurable consequences for your financial life. Here is what it actually does:
It reduces your purchasing power. When inflation runs at 4.2% and your salary increases by 2%, you have received a real pay cut of approximately 2.2%. Your bank balance may be higher but the goods and services it buys have become more expensive. Every year of above-target inflation quietly transfers wealth from savers to borrowers and from cash holders to asset owners.
It raises borrowing costs. The Federal Reserve responds to high inflation by raising interest rates. Higher rates mean more expensive mortgages, car loans, credit cards, and business loans. The rate hiking cycle of 2022–2024 that brought the federal funds rate from near zero to above 5% was a direct response to the 9.1% CPI peak in June 2022 — and millions of Americans paid significantly more to borrow as a result.
It influences mortgage rates and housing affordability. Mortgage rates do not move in lockstep with the federal funds rate but they respond strongly to inflation signals. When inflation is high and the Fed holds rates elevated, fixed mortgage rates stay high — directly determining how much house a buyer can afford and how many existing homeowners can refinance.
It affects stock valuations. Higher inflation typically pushes interest rates higher, which raises the discount rate applied to future corporate earnings. When future earnings are worth less in present value terms, stock valuations compress — which is why equity markets often sell off when inflation prints above expectations.
It determines Federal Reserve policy. Every FOMC interest rate decision begins with an inflation assessment. The Fed's 2% target is not arbitrary — it is the anchor for every monetary policy decision that flows through the entire financial system. When inflation is above target, the Fed holds or raises rates. When it falls below, the Fed cuts. Inflation is the single most important input into the policy that sets the cost of money for the entire economy.
What Is Inflation?
Inflation is not about one price rising — it is about the general level of prices rising across an economy simultaneously. A single product getting more expensive because of supply problems is not inflation. Inflation is when the cost of housing, food, fuel, healthcare, clothing, and hundreds of other goods and services all move upward together over time. (Bureau of Labor Statistics, 2026)
The most direct consequence of inflation is the erosion of purchasing power. If inflation runs at 4% per year and your salary stays flat, you are effectively taking a 4% pay cut in real terms — your nominal income is unchanged but the goods and services it buys have become more expensive. Over 10 years at 4% annual inflation, $100 in purchasing power shrinks to approximately $68 in real value. At the Fed's 2% target, that same $100 retains roughly $82 of its original purchasing power — a significant difference that compounds year after year.
The Bureau of Labor Statistics measures inflation through two key indexes: the Consumer Price Index (CPI) and the Producer Price Index (PPI). CPI is the figure most people see in news coverage. It tracks the average change over time in prices paid by urban consumers for a representative basket of consumer goods and services — everything from rent and groceries to medical care and car insurance. (Bureau of Labor Statistics, 2026) The [Federal Reserve] uses a different measure — the Personal Consumption Expenditures index, or PCE — as its primary gauge when setting interest rate policy.
How Is Inflation Measured? CPI vs PCE Explained
The CPI and PCE measure the same underlying phenomenon — rising prices — but they do it differently, which is why they produce different numbers. The CPI uses a fixed basket of goods with weights updated annually. The PCE updates its weights every month to reflect how consumers are actually spending their money at any given time. (Federal Reserve Atlanta Fed, May 2026)
This matters because consumers substitute — when beef prices rise sharply, many households buy more chicken. The PCE captures that substitution in real time, while the CPI continues tracking the original basket even after consumers have already switched. The result is that PCE inflation typically runs slightly lower than CPI inflation, and the Federal Reserve considers it a more accurate reflection of what consumers are actually experiencing. (Federal Reserve Atlanta Fed, May 2026)
As of the most recent data in 2026, headline CPI stands at 4.2% year-over-year and core CPI — which strips out volatile food and energy prices — stands at 2.9%. (Bureau of Labor Statistics via CNBC, June 2026) On the PCE side, the overall rate is 3.8% and core PCE is 3.3%. (Federal Reserve Dallas Fed, May 2026) Every one of these figures is above the Fed's 2% target — which is precisely why the FOMC has kept interest rates at 3.50% to 3.75% and why rate cuts remain on hold.
The gap between headline and core inflation is itself informative. When headline inflation significantly exceeds core inflation, it typically signals that food and energy prices are driving the surge — categories that are often temporary and supply-driven. When core inflation remains elevated even as headline moderates — as in 2026 — it signals that price pressures have spread more broadly through the economy and are proving more persistent.
How Is Inflation Calculated? The Inflation Rate Formula
The inflation rate formula is straightforward. You take the current period's CPI, subtract the previous period's CPI, divide that difference by the previous period's CPI, and multiply by 100 to convert to a percentage:
Inflation Rate = ((Current CPI – Previous CPI) ÷ Previous CPI) × 100
Example using real-world numbers:
2025 CPI = 300
2026 CPI = 312
Inflation Rate = ((312 – 300) ÷ 300) × 100
= (12 ÷ 300) × 100
= 0.04 × 100
= 4% annual inflation
This means the same basket of goods that cost $300 in 2025 now costs $312 in 2026 — a 4% increase in the general price level.
The Bureau of Labor Statistics calculates the official US CPI by surveying the prices of approximately 80,000 items across more than 200 categories every month — from apartment rents and grocery bills to medical prescriptions and airline tickets. The resulting index is the most widely cited measure of inflation in the United States and the one that most automatically adjusts wage contracts, Social Security payments, and tax brackets. (Bureau of Labor Statistics, 2026)
When you see a headline like "CPI rose 4.2% in May 2026," it means that the same basket of goods and services that cost $100 in May 2025 now costs $104.20. That might sound modest in isolation — but applied across every purchase a household makes over a full year, 4.2% inflation has a substantial and compounding effect on the real cost of living.
What Is a Good Inflation Rate?
The 2% target is not arbitrary. It emerged from decades of central banking experience that showed zero inflation was dangerously close to deflation — and that deflation, once it takes hold, is extremely difficult to reverse. Japan's lost decades of near-zero growth in the 1990s and 2000s, despite near-zero interest rates, are the defining example of what happens when an economy gets trapped in persistent deflation.
At the same time, inflation significantly above 2% creates its own problems: it erodes savings, distorts business investment decisions, punishes fixed-income holders, and — if it becomes entrenched in wage expectations — requires painful monetary tightening to reverse. The Federal Reserve formally adopted its 2% target in January 2012, describing it as "most consistent with the Federal Reserve's mandate for maximum employment and price stability." (Federal Reserve, 2025)
By this standard, the current US rate of 4.2% CPI is meaningfully too high. Germany at 2.7% is closer to target but still above it. Canada at 1.8% is actually slightly below target — a position that gives the Bank of Canada room to cut rates to support growth. The US position at more than double its target is why rate cuts remain firmly off the table in 2026 despite a softening labor market.
What Causes Inflation? The Three Main Drivers
Demand-pull inflation occurs when the total demand for goods and services in an economy outpaces supply. When consumers and businesses have more money to spend than the economy can produce, prices rise to balance the imbalance. This was a key driver of the 2021 inflation surge — pandemic stimulus payments and pent-up consumer demand collided with supply chains that were still recovering from COVID-19 shutdowns. The combined effect of increased demand for durable goods and supply chain shortages was identified by the Bureau of Labor Statistics as the main source of inflation in the second quarter of 2021. (Bureau of Labor Statistics, 2023)
Cost-push inflation occurs when the cost of producing goods rises and businesses pass those higher costs on to consumers through higher prices. Oil price spikes, supply chain disruptions, rising wages, and — critically in 2026 — import tariffs are all forms of cost-push inflation. The distinction matters for monetary policy: demand-pull inflation can be fought effectively with higher interest rates, because rate increases reduce the spending power that is driving demand. Cost-push inflation is harder to solve with rate hikes, because the higher cost of production exists regardless of how much consumers are spending.
Built-in inflation — sometimes called wage-price spiral inflation — occurs when workers expect prices to keep rising and demand higher wages to compensate, which in turn raises business costs, which are then passed on as higher prices, which then trigger further wage demands. This self-reinforcing cycle was a defining feature of the 1970s inflation era and is exactly what central banks try to prevent by keeping inflation expectations anchored near their 2% target. The research by the Brookings Institution and Peterson Institute confirmed that the 2021–2023 surge was driven primarily by commodity price spikes and supply disruptions rather than a wage-price spiral — an important distinction that shaped how the Fed ultimately managed that episode. (Brookings Institution, July 2023)
What Is Causing US Inflation in 2026? The Tariff Effect
The most significant finding in the 2026 inflation story is not just that prices are rising — it is why they are rising. Federal Reserve economists published research in April 2026 confirming that the tariffs implemented by President Trump in 2025 are responsible for the entirety of excess inflation in the core goods category since January 2025. Without those tariffs, inflation would have already fallen to pre-pandemic levels during 2025. (Federal Reserve, April 2026)
The mechanism is direct: tariffs raise the cost of imported goods for US businesses. Those businesses pass the higher costs on to consumers through higher prices. The Fed research found that tariffs inflated goods personal expenditure by 3.3% through 2025 — and that this effect amounts to a dollar-for-dollar price increase, meaning the tariff cost was not absorbed by importers or retailers but transferred in full to consumers. (Federal Reserve, April 2026)
The Congressional Budget Office had already projected this outcome in June 2025, estimating that the tariff policies would increase the average annual PCE inflation rate by roughly 0.4 percentage points over 2025 and 2026, and that by 2026 the PCE price level would be 0.9% higher than it would have been without them. (Congressional Budget Office, June 2025)
This creates a specific policy dilemma for the [Federal Reserve]. Tariff-driven cost-push inflation cannot be cured by raising interest rates — higher rates do not make imported goods cheaper. But the Fed also cannot cut rates while inflation remains at 4.2%, because doing so would risk signaling that price stability is no longer the priority. Jerome Powell acknowledged this explicitly in March 2026, stating that officials would need to see "progress in reducing inflation, especially goods inflation that has been boosted by tariffs" before resuming rate cuts. (Bloomberg, March 2026) For the connection between [tariffs] and market prices, see our dedicated explainer.
Inflation Through History: The 1970s, 2022 Peak, and What They Tell Us
The 1970s stagflation era is the defining case study in what happens when inflation becomes entrenched. The OPEC oil embargo of 1973 triggered an energy price shock that rippled through every corner of the economy. Rather than tightening monetary policy aggressively, the Federal Reserve kept rates too low for too long — allowing inflation to become embedded in wage expectations and corporate pricing decisions. By the late 1970s, inflation had become self-reinforcing: workers demanded higher wages because they expected prices to rise, businesses raised prices to cover higher wage costs, and the cycle accelerated.
Paul Volcker — appointed Fed Chair in 1979 — broke the cycle through one of the most aggressive monetary tightening campaigns in central banking history. He raised the federal funds rate to a peak monthly average of 22.36% in July 1981, deliberately triggering a recession to destroy inflationary psychology. The unemployment rate hit 10.8% in November 1982 — the highest since the Great Depression. But inflation collapsed, and the credibility the Fed earned from that episode shaped central bank policy globally for the next four decades. For context on how the [federal funds rate] is set and what it controls, see our dedicated explainer.
The 2021–2023 surge was a different kind of inflation event. CPI peaked at 9.1% in June 2022 — the largest 12-month increase in 40 years. (Bureau of Labor Statistics, July 2022) Unlike the 1970s, this surge was driven primarily by supply chain disruptions and a pandemic-era demand shift to goods from services — not by loose monetary policy alone. Brookings Institution and Peterson Institute research confirmed that sharp increases in global commodity prices and pandemic-induced supply chain bottlenecks were the dominant drivers, rather than a wage-price spiral. (Brookings Institution, July 2023)
The Federal Reserve formally adopted its 2% inflation target in January 2012 — a commitment designed to anchor long-term inflation expectations and prevent the kind of drift that characterized the 1970s. The target is measured by PCE, not CPI, and is described by the Fed as "most consistent with the Federal Reserve's mandate for maximum employment and price stability." (Federal Reserve, 2025)
Types of Inflation: Hyperinflation, Stagflation, and Deflation
Hyperinflation is inflation that has become completely uncontrolled — typically defined as a monthly inflation rate exceeding 50%. The most cited historical example is Weimar Germany in 1923, where the collapse of the German mark following World War One reparations led to prices doubling every few days at the peak. Workers were famously paid twice daily so they could spend their wages before they lost value. Zimbabwe in the late 2000s experienced a similar collapse, with annual inflation estimated in the hundreds of millions of percent at its peak. Hyperinflation destroys savings, collapses trade, and typically requires a complete currency replacement to resolve.
Stagflation — a combination of stagnant economic growth, high unemployment, and high inflation — is the most difficult environment for monetary policymakers to navigate. It is the 1970s scenario described above, and it is the risk that some economists see in the current 2026 US environment: inflation at 4.2%, unemployment rising to 4.3%, and growth being squeezed by tariff costs and higher borrowing rates simultaneously. Standard monetary policy tools are poorly suited for stagflation — rate hikes fight inflation but worsen unemployment, while rate cuts protect jobs but worsen inflation.
Deflation — falling prices — sounds like good news but is considered one of the most dangerous economic conditions by central banks worldwide. When consumers expect prices to fall tomorrow, they delay purchases today — waiting for a better price. That delay reduces business revenues, leading companies to cut staff, leading workers to spend less, which reduces demand further, which pushes prices down more. Japan spent most of the 1990s and 2000s trapped in a deflationary spiral that proved nearly impossible to escape despite decades of near-zero interest rates. This is precisely why the Federal Reserve targets 2% positive inflation rather than 0% — a small cushion of rising prices keeps the deflationary trap at bay.
How Inflation Affects Your Money: Mortgages, Savings, and Investments
If you hold a fixed-rate mortgage, inflation is quietly working in your favor — your monthly payment stays the same in nominal terms while the real value of that debt shrinks alongside the purchasing power of money. A homeowner who locked in a 30-year mortgage at a fixed rate in 2020 is repaying that loan with dollars that are worth significantly less than the dollars they borrowed. This is one of the structural reasons why homeownership has historically been an effective hedge against moderate inflation.
Renters face the opposite dynamic. Rent is not fixed — landlords adjust lease prices at renewal to reflect current market conditions, which themselves reflect inflationary pressures. A renter in a high-inflation environment faces rising shelter costs with no corresponding reduction in the real value of their housing obligation. This asymmetry — fixed-rate mortgage holders protected, renters exposed — is one of the mechanisms through which inflation can widen wealth gaps over time.
For savers, the critical question is whether the interest rate on their savings exceeds the inflation rate. When inflation runs at 4.2% and a savings account pays 2%, the saver is losing 2.2% of their real purchasing power every year — even as their nominal balance grows. Cash held outside of interest-bearing accounts loses purchasing power at exactly the rate of inflation — silently and automatically. This is why financial advisors consistently warn against holding excessive cash during inflationary periods.
For investors, the picture is more complex. Equities have historically maintained purchasing power over long periods because companies can raise their prices in line with inflation, protecting revenues in real terms. Treasury Inflation-Protected Securities — known as TIPS — are US government bonds whose principal value is adjusted upward with inflation, providing an explicit hedge against CPI increases. Real assets like property and commodities have also historically outperformed during high-inflation periods. The asset class that performs worst in inflation is nominal fixed-income — standard bonds that pay a fixed interest rate — because the real value of both the coupon payments and the principal repayment erodes as inflation rises. For a full explanation of how bonds work and how inflation affects them, see [What Is a Bond? Investment Bonds Explained].
US Inflation vs the World: How Does 4.2% Compare?
The international comparison tells the most important story about the current inflation episode. Germany's CPI stood at 2.7% year-over-year in March 2026 — within striking distance of the European Central Bank's 2% target. Core inflation in Germany was 2.5%. (Statistisches Bundesamt, April 2026)
The UK was running headline CPI at 3.4% as of December 2025 and core CPI at 3.2% in February 2026 — elevated above the Bank of England's 2% target but still meaningfully below the US rate. (Office for National Statistics, March 2026) Canada, meanwhile, had seen inflation slow to just 1.8% in February 2026 — below its own central bank's 2% target and the lowest of any major economy in this comparison.
The divergence is significant. Germany at 2.7%, Canada at 1.8%, and the UK at 3.4% are all within ranges that their respective central banks consider manageable. The US at 4.2% is an outlier — and the Federal Reserve's own research points to the tariff policy as the explanation for why. Countries that are not imposing broad import tariffs are not experiencing the same cost-push inflation effect. This makes the current US inflation episode not just an economic problem but a direct consequence of a specific policy choice — one that monetary policy tools are poorly designed to address.
Frequently Asked Questions
What is inflation?
Inflation is the overall general upward price movement of goods and services in an economy over time. It is measured in the United States by the Bureau of Labor Statistics through the Consumer Price Index — tracking the average price change of a representative basket of goods and services purchased by urban consumers. As of May 2026, US headline CPI inflation is running at 4.2% year-over-year.
What is the current inflation rate?
The current US headline CPI inflation rate is 4.2% year-over-year as of May 2026 — the highest in three years. Core CPI, which excludes volatile food and energy prices, is running at 2.9%. The Federal Reserve's preferred measure — PCE inflation — stood at 3.8% as of April 2026, with core PCE at 3.3%. All figures are well above the Fed's 2% inflation target.
What causes inflation?
Inflation has three primary causes. Demand-pull inflation occurs when consumer spending outpaces supply — too much money chasing too few goods. Cost-push inflation occurs when rising production costs are passed on to consumers through higher prices — as with tariffs or oil price spikes. Built-in inflation occurs when workers and businesses expect prices to keep rising and adjust wages and prices accordingly, creating a self-fulfilling cycle. In 2026, US inflation is primarily cost-push, driven by import tariffs.
What is the difference between CPI and PCE inflation?
CPI is calculated by the Bureau of Labor Statistics using a fixed basket of goods updated annually. PCE is calculated by the Federal Reserve using a basket updated monthly to reflect actual consumer spending patterns. PCE captures consumer substitution — when people switch to cheaper alternatives as prices rise — more quickly than CPI. This is why PCE typically runs slightly lower than CPI and why the Fed uses PCE as its official 2% inflation target measure.
What is the Federal Reserve's inflation target?
The Federal Reserve's official inflation target is 2% per year, measured by the Personal Consumption Expenditures price index. The 2% target was formally adopted on January 25, 2012, in the FOMC's Statement on Longer-Run Goals and Monetary Policy Strategy. The Fed considers 2% inflation most consistent with its dual mandate of maximum employment and price stability — low enough to protect purchasing power while providing a buffer against deflation.
What is hyperinflation?
Hyperinflation is inflation that has become catastrophically uncontrolled — typically defined as a monthly inflation rate exceeding 50%. The most cited example is Weimar Germany in 1923, where the collapse of the German mark saw prices doubling every few days at the peak. Workers were paid twice daily to spend wages before they lost value. Hyperinflation destroys savings, collapses trade, and requires a complete currency restructuring to resolve.
What is stagflation?
Stagflation is the combination of high inflation, high unemployment, and slow economic growth occurring simultaneously — the worst of all worlds for monetary policymakers. The defining example is the US in the 1970s, when OPEC oil shocks and loose monetary policy produced double-digit inflation alongside rising unemployment. Stagflation is particularly difficult to manage because the tools used to fight inflation — higher interest rates — tend to worsen unemployment and growth.
How does inflation affect savings?
Inflation erodes the purchasing power of savings held in cash or low-yield accounts. When inflation runs at 4.2% and your savings account pays 2%, you are losing 2.2% of real purchasing power every year — even as your nominal balance grows. To maintain purchasing power, savers need their savings to earn a return that exceeds the inflation rate. TIPS, equities, real estate, and inflation-linked savings products are common inflation hedges for this reason.
What is driving inflation in 2026?
Federal Reserve research published in April 2026 confirmed that Trump tariffs implemented in 2025 explain the entirety of excess inflation in core goods since January 2025 — a dollar-for-dollar price increase passed directly to consumers. The Congressional Budget Office separately estimated that these tariffs will raise the PCE price level by 0.9% by 2026. Without tariffs, the Fed's own economists found inflation would have already fallen to pre-pandemic levels during 2025.
How does inflation affect mortgage holders vs renters?
Fixed-rate mortgage holders benefit from inflation in real terms — they repay a fixed nominal sum with money that is worth less over time, effectively shrinking the real burden of their debt. Renters face the opposite: landlords adjust lease prices at renewal to reflect current market conditions, exposing renters to the full impact of rising costs with no offsetting reduction in their housing obligation. This asymmetry is one of the reasons homeownership has historically been an effective inflation hedge.
What is a good inflation rate?
Most major central banks consider 2% annual inflation to be the optimal rate. At 2%, prices rise gently enough to prevent deflation, real wages can grow, and monetary policy retains room to cut rates during downturns. The Federal Reserve formally adopted its 2% PCE inflation target in January 2012. Inflation well above 2% — as in the current US environment at 4.2% — erodes purchasing power and keeps borrowing costs elevated.
What causes inflation and deflation?
Inflation is caused by demand-pull forces (too much spending relative to supply), cost-push forces (rising production costs passed to consumers), and built-in wage-price spirals. Deflation — falling prices — is typically caused by a collapse in demand, often during recessions or financial crises. Central banks consider deflation more dangerous than moderate inflation because it triggers a cycle of delayed spending and economic contraction that is very difficult to reverse.
How can you protect yourself from inflation?
The most effective protections against inflation are assets whose value or income rises with prices. These include equities — as companies can raise prices to protect revenues — real estate, Treasury Inflation-Protected Securities (TIPS) whose principal adjusts with CPI, commodities, and inflation-linked savings accounts. The assets that perform worst during inflation are cash and nominal fixed-rate bonds, both of which lose real value when the inflation rate exceeds their yield.
How do you calculate the inflation rate?
The inflation rate is calculated using the formula: Inflation Rate = ((Current CPI – Previous CPI) ÷ Previous CPI) × 100. For example, if CPI was 300 last year and is 312 this year: ((312 – 300) ÷ 300) × 100 = 4% inflation. The Bureau of Labor Statistics publishes monthly CPI figures for the United States, which are used to calculate the official annual inflation rate reported in the news each month.
Sources and Further Reading
- Bureau of Labor Statistics. Inflation and Consumer Price Index Overview. 2026. [https://www.bls.gov/bls/inflation.htm]
- Bureau of Labor Statistics. Consumer Price Index — May 2026. June 2026. [https://www.bls.gov/news.release/cpi.nr0.htm]
- Bureau of Labor Statistics. Consumer Prices Up 9.1 Percent Over the Year Ended June 2022. July 2022. [https://www.bls.gov/opub/ted/2022/consumer-prices-up-9-1-percent-over-the-year-ended-june-2022-largest-increase-in-40-years.htm]
- Bureau of Labor Statistics. What Caused the High Inflation During the COVID-19 Period? 2023. [https://www.bls.gov/opub/mlr/2023/beyond-bls/what-caused-the-high-inflation-during-the-covid-19-period.htm]
- Federal Reserve Atlanta Fed. What Is PCE? Explaining the Fed's Preferred Inflation Measure. May 2026. [https://www.atlantafed.org/what-we-study/inflation/2026/05/20/what-is-pce-explaining-the-feds-preferred-inflation-measure]
- Federal Reserve Dallas Fed. PCE Inflation Data. May 2026. [https://www.dallasfed.org/research/pce]
- Federal Reserve. Why Does the Federal Reserve Aim for 2 Percent Inflation Over Time? 2025. [https://www.federalreserve.gov/faqs/economy_14400.htm]
- Federal Reserve. Statement on Longer-Run Goals and Monetary Policy Strategy Timeline. 2025. [https://www.federalreserve.gov/monetarypolicy/timeline-statement-on-longer-run-goals-and-monetary-policy-strategy.htm]
- Congressional Budget Office. Effects of Tariff Policies on Inflation. June 2025. [https://www.cbo.gov/system/files/2025-06/61389-Tariff-Effects.pdf]
- Brookings Institution / Peterson Institute. What Caused the US Pandemic-Era Inflation? July 2023. [https://www.brookings.edu/articles/what-caused-the-u-s-pandemic-era-inflation/]
- Statistisches Bundesamt. Consumer Price Index Germany — March 2026. April 2026. [https://www.destatis.de/EN/Press/2026/04/PE26_127_611.html]
- Office for National Statistics. Consumer Price Inflation — February 2026. March 2026. [https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/february2026]
- Bloomberg. Fed Holds Rates Steady, Still Projects One Rate Cut in 2026. March 2026. [https://www.bloomberg.com/news/articles/2026-03-18/fed-holds-rates-steady-still-projects-one-rate-cut-in-2026]
Inflation at 4.2% is not just a statistic — it is a daily reality for every American who buys groceries, pays rent, fills a gas tank, or carries a credit card balance. The 2026 inflation story is particularly important because it is being driven not by excessive consumer spending or a hot economy, but by a specific policy choice — tariffs — that monetary policy is poorly equipped to reverse. Understanding what inflation is, how it is measured, and what causes it is the foundation for making sound financial decisions in any economic environment. For the next step in building this understanding, see [What Is the Federal Reserve? Definition, Role, and How It Affects You] and [What Is the Federal Funds Rate? Definition and How It Moves Markets].
No comments:
Post a Comment