by Fernando M. Martin
St. Louis Fed
Five years after the start of the COVID-19 pandemic, prices are 10% above their prepandemic trend. Inflation peaked in mid-2022 and has since declined sharply, though progress towards the Federal Reserve’s 2% target may have stalled recently. This inflation episode was and remains broad-based, with most product categories still experiencing higher inflation than before the pandemic. In this blog post, I will provide an account of the inflation surge, the road back to 2%, and where we are today according to the latest data available.
The Recent Path of Inflation
The first figure plots the monthly evolution of the personal consumption expenditures (PCE) price index from January 2016 to December 2024, along with a line indicating its prepandemic (2016-19) trend. Before the onset of the pandemic, prices were growing at a steady rate of 1.7% annually, which was slightly below the Federal Reserve’s 2% target.