The September consumer price index rose 3.7% from a year earlier. That single reading is not the story. The story is the stretch behind it: roughly 65 consecutive months of annual inflation above 2%, the target most central banks treat as stable. That is more than five years, the longest such run of the 21st century, and one of only three periods this long since the late 1940s.
Inflation has been above 2% (The Fed’s long term inflation goal) for 66 readings in a row, causing consumers to wonder if this is the “new normal” (Chart source: CNBC)
Cleveland Fed President Beth Hammack put the behavioral shift in plain language last week. “They’re starting to accept high inflation as just a fact of life,” she wrote. “That’s concerning.” When households and businesses stop treating higher prices as temporary and start planning as if they will continue, the tools the Federal Reserve uses to slow demand become less reliable. The risk is not only that prices stay high. It is that the expectation of higher prices becomes self-reinforcing.
What the numbers show
