After the Great Recession, inflation remained low as the banking system recovered. For several years, inflation did not exceed 2%. But in recent months, inflation has come roaring back.
President Biden described the rise as “temporary”, but many people fear inflation will take root. Understanding inflation Inflation is the general rise in prices in an economy over a period of time. The Federal Reserve generally targets a low and stable inflation rate of around 2%, which can be a sign of a growing economy.
However, inflation can reach double-digit levels following economic shocks. Inflation has fluctuated throughout history. In the 1970s and 1980s, prices rose by 10-15% in some years. Since then, inflation has slowed down. In the 2000s, the inflation rate fluctuated between 2% and 5%, while in the 2010s it fluctuated between 0% and 2%. In other words, prices have been remarkably stable in the recent past compared to other periods in history. Recently, however, inflation has picked up. In the 12 months to July 2021, inflation reached 5.4%, one of the highest levels in recent years.