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In 2025, the annual rate of inflation in the United States, was *** percent. This reflected a further slowing in inflation after the 2024 rate reached *** percent. Most recently, U.S. inflation peaked in 2022 at * percent.

What is inflation?

Inflation measures the rate of change in the prices of goods and services in the economy. The most common gauge for this is the consumer price index (CPI). When inflation is high, it decreases the purchasing power of money, meaning that each dollar can buy a little less than it did before. This is why high inflation is so disruptive. It erodes the value of people’s incomes.

Inflation and purchasing power

Interest rates are policymakers' main tool for taming inflation. In the U.S. the Federal Reserve has the capacity to set the federal interest rate. Raising interest rates limits the supply of money in the economy, which can slow price increases. After COVID-19 lockdowns, government stimulus checks increased households' access to cash, driving up demand. At the same time, supply chain bottlenecks reduced the supply of goods available to buy. This resulted in a price spike after years of relative stability.