The Federal Reserve, the nation's central bank, operates with a "dual mandate" for the U.S. economy:
- Maximum employment
- Stable prices
The Federal Reserve has established an inflation target of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, over time. Before the recent surge in prices, the Fed was meeting its inflation target.
Inflation Rate, 2016-2021
Inflation Rate, 2021-Present
Price levels were steady through Q1 2021. Then everything changed.
Inflation rates are now at 40-year highs — approaching 10% — due to record-high demand and global supply chains still recovering from an unprecedented Covid shock.