US Inflation Rate (CPI)

The US inflation rate shown here is derived from the Consumer Price Index for All Urban Consumers, the index the Bureau of Labor Statistics has tracked continuously since 1947. The headline number most people mean by 'inflation' is the percentage change in this index over the prior twelve months: how much more, on average, the same basket of goods and services costs today than it did a year ago. The index itself is set so that the 1982 to 1984 period equals 100, which is why the raw level on the chart is a large number rather than a percentage — the inflation rate is the rate of change of that level, not the level itself.

The non-obvious point is that CPI is not the inflation measure the Federal Reserve actually targets. The Fed frames its 2% goal in terms of the PCE price index, and CPI has historically run a few tenths of a percentage point hotter than PCE because of differences in formula and in how the two baskets are weighted. CPI is nonetheless the number that shapes everyday life: Social Security cost-of-living adjustments, many wage contracts, and the inflation adjustment on TIPS all key off CPI, not PCE. So the reading shown above is simultaneously the most widely felt inflation gauge and not the one the central bank steers by.

A rising twelve-month rate means prices are climbing faster than they were a year earlier; a falling rate means the pace of price increases is slowing, which is disinflation rather than outright deflation. Deflation — an actual fall in the price level — is rare in the modern US record and shows up as a negative reading. The reference point that matters most is roughly 2%, the pace generally considered consistent with price stability. Readings persistently above that have historically pressured the Federal Reserve toward tighter policy, while readings well below it have accompanied easier policy.

It pays to separate the level of the rate from its direction. A 4% reading that is falling month after month tells a very different story than a 4% reading that is accelerating, even though the headline number is identical. For that reason the trend matters as much as the threshold, and a single month can be noisy because of one-off swings in volatile categories. That is exactly why analysts also watch the core inflation rate, which strips out food and energy to reveal the underlying trend beneath the headline reading shown above.

At the broadest level, inflation reflects too much demand chasing too little supply, but the specific drivers shift across episodes. Demand-pull inflation comes from strong spending, easy financial conditions, and a tight labor market bidding up wages and prices. Cost-push inflation comes from supply shocks — an oil embargo, a pandemic snarling shipping, a drought lifting food prices — that raise costs regardless of demand. The energy component is the single most volatile piece, which is why a barrel of crude can swing the headline number sharply in a single month even when the underlying trend is stable.

Monetary conditions sit underneath all of this. Sustained, broad-based inflation has historically required accommodative money and credit, which is why the federal funds rate, the money supply, and the size of the Fed balance sheet all feature among MacroRadar's charts as part of the same story. The 2021 to 2022 surge was a vivid case study: pandemic supply disruptions collided with enormous fiscal and monetary stimulus and a rebound in demand, and the result was the fastest CPI inflation in four decades.

The defining episode is the Great Inflation of the 1970s and its resolution. CPI inflation climbed through that decade and peaked near 14.8% in March 1980, driven by two oil shocks, loose policy, and entrenched expectations. Federal Reserve Chair Paul Volcker broke it by pushing the federal funds rate above 19%, triggering back-to-back recessions in the early 1980s but bringing inflation down to low single digits by the middle of that decade. That episode is the reason central bankers treat inflation expectations as something to be defended at almost any cost.

The decades that followed told the opposite story. From the mid-1980s into the 2010s inflation was mostly low and stable — the 'Great Moderation' — punctuated by the 2008 crisis, after which the worry briefly flipped to deflation. Then came the post-pandemic surge of 2021 to 2022, when CPI inflation again touched levels not seen since the early 1980s before receding as supply chains healed and the Fed tightened aggressively. The full chart above, running back to 1947, lets you place the current reading against both the inflationary 1970s and the quiet decades that bracketed them.

The underlying series here is FRED's CPIAUCSL — the seasonally adjusted Consumer Price Index for All Urban Consumers — published monthly by the Bureau of Labor Statistics. The BLS prices a fixed basket of thousands of goods and services across hundreds of urban areas, weighting each category by its share of household spending, and the index measures how the cost of that basket changes over time. The inflation rate is then computed as the percentage change in the index, most commonly over twelve months, sometimes annualized over three or six months to capture momentum.

Two caveats matter. First, CPI uses a relatively fixed basket and is updated less fluidly than PCE, which is one reason it tends to read a few tenths higher; consumers substitute toward cheaper goods faster than the basket fully reflects. Second, while CPI is revised far less than many economic series — seasonal factors are the main source of revision — methodology has evolved over the decades, so very long-run comparisons should be read as broadly indicative rather than perfectly like-for-like. For the underlying trend with the noisiest pieces removed, see the core inflation rate.

Inflation sits at the center of a tightly linked family of MacroRadar charts. The core inflation rate strips out food and energy to show the persistent trend beneath this headline reading, while the Core PCE price index and headline PCE price index offer the Fed's preferred lens on the same phenomenon. The 10-Year breakeven inflation rate adds a forward-looking, market-implied view of where investors expect inflation to settle over the coming decade, complementing the backward-looking CPI shown here.

The policy and market consequences run through interest rates. Because inflation is the Federal Reserve's primary mandate alongside employment, the federal funds rate has historically tracked the inflation backdrop, and the 10-Year Treasury yield embeds inflation expectations into the cost of long-term borrowing. Upstream, the M2 money supply and the Fed balance sheet describe the monetary conditions that can fuel or starve inflation. Reading CPI alongside these charts turns a single number into a coherent story about money, prices, and policy.

The macro-regime panel above places the current CPI reading in the context of growth, employment, and financial conditions rather than in isolation. Inflation running hot while the labor market is tight has historically coincided with a tightening bias from the Federal Reserve; inflation cooling toward target alongside softening growth has tended to accompany an easing bias. The value of the regime view is that it shows whether the inflation reading is reinforcing or cutting against the other signals on the dashboard.

None of this is a forecast. The purpose of overlaying the regime is to see whether today's inflation picture is consistent with the broader environment or diverging from it, and to recall how similar combinations played out historically. Because a single month's CPI can be distorted by volatile components, the most useful read is the direction of the trend and how it sits relative to the roughly 2% reference, weighed against the rest of the macro picture rather than taken on its own.

Inflation is the silent hurdle every long-term return must clear. A portfolio that grows 5% in a year when prices rise 5% has gained nothing in real terms, which is why inflation erodes the purchasing power of cash and fixed-rate bonds most directly. Historically, sustained inflation has been hardest on long-duration nominal bonds and easiest to weather for assets whose cash flows or prices adjust with the price level, such as inflation-protected bonds, some commodities, and equities of companies with pricing power. The 1970s remain the canonical lesson in how corrosive entrenched inflation can be to real wealth.

The aim of this chart is context, not a call to act. Pairing the long-run inflation record with the current macro regime above frames whether today's environment resembles past inflationary or disinflationary stretches, and how different asset classes tended to behave through them. Treat it as one input into a diversified, long-horizon plan rather than a reason to reposition around any single month's number. This is a historical indicator, not a forecast or investment advice.