Consumer price index

Movements in the consumer price index influence economic decisions in several circumstances. Firstly, the Federal Reserve uses the Personal Consumption Expenditure Price Index, a comparable measure of inflation, to guide their monetary policy implementation. Inflation above a certain rate has several negative effects on economic growth; as a result, central banks often implement tight monetary in response to inflation levels that are higher than the target rate of price change. In a growing economy, positive inflation typically occurs, while deflation typically occurs during recessionary periods. Consequently, a low and steady level of inflation is the standard target. Governments also look at movements in the consumer price index when making fiscal policy decisions, as expansionary fiscal policy increases aggregate demand, but also creates inflationary pressures, which places a constraint on the use of fiscal policy. Furthermore, movements in the consumer price index are used to influence wage negotiations for workers and unions.

In 2007 and 2008, the Consumer price index grew 2.9% and 3.8%, respectively. In 2008, inflation grew strongly over the first four months of the year, but surged between May and July, driven by high energy and food prices. However, as the Great Recession's grip began to spread around the globe, there was a rapid decline in overall commodity prices in the fourth quarter of the year. The fall in commodity prices continued in 2009, causing the consumer price index to record its first annual decline in more than three decades. The dip was led by transportation prices, due to a 28.0% fall in motor fuel prices, caused by the swift contraction in world oil demand. Additionally, airline prices and other intercity transportation costs slipped 9.0% and 6.0%, respectively, due to softer demand for domestic and international travel.

Immediately following the recession, the consumer price index rose 1.6% in 2010, 3.2% in 2011 and 2.1% in 2012. Since then, fears of an extended period of either deflation or high inflation proved to be largely unfounded as the economy began its gradual recovery. In 2015, the consumer price index grew 0.1%, as monetary expansion failed to translate to higher prices. Moreover, sharp declines in the price of crude oil and other key commodities limited price growth in 2015 and 2016. Nevertheless, the consumer price index grew 1.3% in 2016. According to the BLS, between January 2016 and January 2017, medical expenses increased 3.6%, which was countered by total food prices declining 0.2% during that same period. Still, the primary factor driving growth was energy prices increasing 10.8% over the year; more specifically, motor fuel costs increased 20.2%. In 2020, the consumer price index increased just 1.2% as lower consumer spending amid the COVID-19 (coronavirus) pandemic and the collapse of energy prices weighed on price growth significantly. In 2021, inflation was affected by a variety of factors. Supply chain disruptions instigated by the coronavirus pandemic in areas such as semiconductors, coupled with continued fiscal and monetary support, drove large increases in home automobile prices. Similarly, extreme weather events acted as negative supply shocks to oil and gas in energy supply chains that service the US market. As a result, inflation was higher in 2021, with year-on-year inflation of 4.7%.

In 2022, continued pressures on supply chains, wage growth and surging inflation increased the consumer price index. Additionally, the Ukraine-Russia war contributed to increased oil prices during the year, along with an increase in food prices. Despite the Federal Reserve's aggressive policy of raising interest rates, inflation remained high during the much of the year, leading to higher prices. Overall, these factors led to an increase of 8.0% during the year alone. As the Federal Reserve continued to raise interest rates in 2023 to combat inflation, the consumer price index still increased an additional 4.1% during the year. Rising gasoline prices combined with high housing and grocery costs continue to stress consumers as inflation remains above the Federal Reserve's 2.0% target range. Despite easing inflation and rate cuts, the consumer price index has rose 2.9% during 2024 primarily due to high shelter costs. With additional rate cuts being threatened by increased prices associated with implemented tariffs, the consumer price index will increase an additional 2.8% during 2025.