As the country has emerged from the COVID-19 pandemic, the recovery of the national economy has been largely positive. However, one unwanted side effect of the rapid economic bounce back has been an environment that pushed inflation to its highest level in 40 years. Now, after decades as an afterthought, inflation is top of mind for U.S. households, businesses and public officials.

Through the 2010s, inflation had been kept in check, hovering at or below the Federal Reserve target of 2 percent. The COVID-19 pandemic and related response pushed inflation under 1 percent as demand for many goods and services plummeted. At the same time, an unprecedented array of federal aid packages injected $4.5 trillion into the U.S. economy via household stimulus payments, enhanced unemployment benefits, business payroll support and other programs. That aid helped keep the national economy afloat and turn the corner toward recovery sooner, but it also played a role in today’s high inflationary environment.

The inflation rate began its climb in mid-2021 as the national economy began to emerge from the depths of the pandemic. The early inflationary rise was due in part to the suppressed pricing environment of 2020, though pent-up consumer demand coupled with a surplus of household income and supply-chain constraints soon pushed inflation past 5 percent. The inflation rate stabilized near 5.4 percent through the summer before jumping past 6 percent in October, reaching 7 percent I December and peaking at 8.5 percent in March before dipping to 8.3 percent in April, the latest month of data. The last time inflation passed 8 percent was in the early 1980s during a period of hyperinflation that peaked at nearly 15 percent.

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