Inflation has eased since a 2022 peak, but an estimated three-quarters of American adults are still concerned about coming price increases. While the inflation rate has dropped to 2.9% as of December 2024, Americans are feeling the lasting impact of a historic spike.
How is inflation trending?
After rising to a 40-year high of 9.1% in June 2022, the inflation rate trended down for much of 2023 and 2024, falling to a low of 2.4% in September 2024 before ticking up over the next few months.
The declining inflation rate means prices have been rising at a more gradual pace, and this can in turn mean less stress on consumers.
But a deeper look at the CPI and other economic data may provide more context on the consumer experience.
The lasting effects of high inflation
The inflation rate is typically measured year-over-year, which is to say as a percentage change between the month being measured and the same month a year before. This provides a standardized, longer-term snapshot, and there’s no need to adjust for seasonality since the ratio compares the same times of year.
But price increases don’t tend to disappear when inflation drops — they’re continuous and compounding. A heightened inflation rate over an extended period of time raises the baseline for future inflationary growth, and decreasing inflation doesn’t undo any of the growth that’s already occurred.
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Take an item that cost $100 in December 2021: Using the average inflation rate for all items and services, the same item would cost $106.47 in December 2022, at which point prices had risen 6.5% in the prior year. By December 2023, the inflation rate had fallen to 3.4%, meaning prices were still rising, but at a slower pace. That month, the item would cost $110.03. In December 2024, it would cost $113.03.
That’s comparatively modest growth over the latter two years, but that growth is happening on top of all previous growth.
Here’s how that increase would look. The blue line, for comparison, represents how that item’s price would have changed if inflation had held steady at its 21st-century average rate, while the pink line tracks the actual price changes. Although the inflation rate has come down, the impact of the period of elevated inflation is still evident. The price hasn’t returned to where it would have been with average growth.
Another way to visualize the lasting impact of inflation spikes is to look at longer period of time. While looking at inflation over one year gives you a snapshot, a longer view adds context that could still be relevant to the consumer experience.
When looking at the change in the CPI over one or two years, 2024 looks like a period of relief. To illustrate the importance of context: When looking at the change over four or five years, we’re amid the most inflationary era in decades. The CPI change over the last four years was higher in May 2024 than it had been in any month since the 1980s. The five-year rate hit a high in 2024 that hasn’t been seen since 1993.
In this sense, the state of inflation can be a matter of how you choose to frame it.
Are wages increasing faster than inflation?
While inflation measures the increase in prices for goods and services, consumer wages also tend to increase in a healthy economy. If wages keep up with inflation, consumers may feel the impact of rising prices less; if not, price increases may sting more. Buying power counts.
From 2021 to 2023, inflation outpaced wage growth. The median annual wage grew by a total of 5.0% over that time, from $45,760 to $48,060, but the CPI increased by 13.0%. In other words, adjusting for inflation, wages went down.
How are prices impacting Americans?
While inflation has eased its year-over-year pace, government data suggests that rising prices are still impacting Americans.
The latest Household Pulse Survey, which collected responses from August 20 to September 16, 2024, found that an estimated 77.6% of American adults were at least somewhat concerned about price increases in the coming six months.
A 2023 Federal Reserve survey also found that 35% of Americans listed inflation as their main financial challenge. A fifth of respondents — 21% — cited basic living expenses, and another 12% are most challenged by the cost of housing.
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Page sources and methodology
All of the data on the page was sourced directly from government agencies. The analysis and final review was performed by USAFacts.
Bureau of Labor Statistics
Consumer Price Index
