Inflation

general

Also known as: inflation, CPI, consumer price index

Updated · Written and reviewed by Konstantin Iakovlev

Detailed explanation

The Fed targets 2% annual inflation. 2021-2022 saw CPI peaks above 9%; by mid-2025 it had returned near 2.5%-3%. Core CPI (excluding food/energy) is preferred for monetary policy. Tax brackets, retirement contribution limits, and Social Security COLA are all CPI-indexed annually. Inflation hurts cash savers (real return = nominal − inflation) and benefits debtors (loan principal effectively shrinks). Real interest rates = nominal rate − inflation. Long-term US stock market real return averages ~7%.

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