The Atlantic Daily: A Guide to Inflation

America is experiencing its highest inflation rate in decades. What does that mean for consumers?

a collage of money, a stopwatch and a zig zag line upward
Getty; The Atlantic

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Inflation was bad; now it’s worse. Prices jumped again in November, new data reveal, moving the inflation rate to 6.8 percent—its highest since 1982. The last time prices rose similarly to this, Ronald Reagan was president and the movie E.T. had just hit theaters.

For older Americans, this means confronting their first serious inflation threat in decades. Younger Americans have never lived through anything like this. To help us better understand what exactly it is we’re facing, I asked our staff writer Joe Pinsker to answer four basic questions.

The conversation that follows has been edited and condensed for clarity.

Caroline Mimbs Nyce: How do I know if I’m experiencing inflation?

Joe Pinsker: We’re all experiencing it, but a couple things make us experience it differently. One is that prices for some goods have increased more than prices for others. Someone who buys ground beef every week at the grocery store will be more aware that meat prices are up than someone who’s a vegetarian.

Another big difference is how much money you have. The prices of everyday goods have increased an average of nearly 7 percent over the past year. That’s a lot—even if the thing you’re buying only costs a few dollars, 7 percent really adds up for people on tight budgets. Meanwhile, people with much more money might notice price increases, but still be able to comfortably afford whatever they usually buy.

Caroline: Why is inflation happening right now?

Joe: Basically, people want to buy more than what businesses are producing. Strong demand (people wanting to buy stuff) is a good thing, considering that we had a recession in 2020, but supply (what businesses produce) has been lagging because of pandemic-related snags like shipping delays and shortages of materials. That imbalance pushes up the prices of what’s available.

Caroline: How long will this last?

Joe: I can’t say for sure—and neither can anyone else, really. One guess is that price increases might continue for the next few months and then slow down sometime next year as supply catches up with demand. But just as important is whether people’s pay rises in proportion with prices. So far, on average, it hasn’t, and that’s what makes things less affordable.

Caroline: Is there anything I need to change about my behavior, or am I just along for the ride?

Joe: As a consumer, you can respond to higher prices—if you need to spend less on gas, you can carpool or take public transit—but your behavior won’t change them. Economic conditions right now might influence your decisions about investing or making a big purchase, but in general, you’re just along for the ride.

Further reading: Josh Hausman explains how the pandemic is contributing to rising inflation rates, and Derek Thompson argues that President Joe Biden can do only so much to help curtail them.

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