Key takeaways
- The current annual inflation rate is 2.9%, still stubbornly above the Fed’s 2% target.
- Consumers pay more close attention to cumulative inflation, and prices are 22.5% more expensive today than they were before the coronavirus pandemic recession began in February 2020.
- The Federal Reserve cut interest rates a full percentage point across three consecutive meetings in 2024, but officials look to take a more cautious approach in 2025 as price pressures stay sticky.
Inflation is nowhere near as hot as it was when the U.S. economy first emerged from the coronavirus pandemic, but price pressures remain sticky.
The overall inflation rate for December edged up for a third straight month to 2.9 percent, largely thanks to energy and gasoline prices surging the most since August 2023, according to the Bureau of Labor Statistics’ monthly consumer price index (CPI) report. Excluding food and energy, however, so-called core prices rose less than expected, falling back to their post-pandemic low of 3.2 percent after barely budging for three consecutive months.
Inflation has cooled dramatically since peaking at 9.1 percent in the summer of 2022, historical BLS data shows. The slowdown gave Fed officials cover to begin dialing back interest rates from a 23-year high, cutting borrowing costs a full percentage point across three consecutive meetings in 2024. Fed officials, however, are signaling that they plan to take a cautious approach in the year ahead, penciling in half as many rate cuts for 2025.
The pressure on household budgets remains intact, in the middle of winter home heating season. If interest rates are going to come down, inflation needs to come down. And it’s not.
— Greg McBride, CFA, Bankrate chief financial analyst
Consumer prices are 22.5 percent more expensive than they were in February 2020, a Bankrate analysis of Bureau of Labor Statistics data shows. That price burst means Americans would need about $1,225 to buy the same goods and services that cost $1,000 when the coronavirus-induced recession occurred.
A little bit of inflation is good for consumers. The economy keeps growing and businesses continue expanding, hiring workers and bumping up their pay along the way. Too much inflation, however, feels akin to taking a pay cut. High inflation has consequences beyond just affordability, complicating saving for emergencies or investing for retirement.
Looking for the latest information on consumer prices? Here’s a round-up of where inflation is improving — and where it’s still remaining stubborn.
Highlights of the latest statistics on inflation
What is the current inflation rate?
Between November and December, prices rose 0.4 percent, the largest gain since February, the latest data from the Bureau of Labor Statistics showed. That lifted the overall inflation rate to 2.9 percent for December, after a 2.7 percent increase in November.
Inflation is well below its peak in June 2022, when it smashed 9.1 percent. Yet, the figures reflect bumpier progress on inflation’s path back to the Fed’s 2 percent target.
Prices that are rising the most
Of the nearly 400 items that BLS tracks, slightly more than 7 in 10 items (or 71 percent) increased in price between December 2023 and 2024.
According to BLS, these are the prices that increased most over the past year:
| Item | December 2023-December 2024 increase |
|---|---|
| Eggs | 36.8% |
| Frozen noncarbonated juices and drinks* | 12.5% |
| Other condiments | 12.4% |
| Video discs and other media* | 12.3% |
| Pet services | 11.5% |
| Motor vehicle insurance | 11.3% |
| Postage | 10.6% |
| Care of the sick and elderly at home* | 9.5% |
| College textbooks | 8.9% |
| Airline fares | 7.9% |
| *Denotes an item that isn’t seasonally adjusted | |
Month-over-month price changes, however, can give consumers a more real-time look at the prices that have recently been popping — or slowing. Lower prices in the same year-ago period, for example, can cause an item to look like it’s gaining speed, when it’s slowing in reality.
Case in point: Back in May, energy prices rose 3.5 percent over the 12-month period, appearing to be gaining speed from April’s 2.5 percent annual increase despite dipping 2 percent over the month. The reason for the discrepancy? May 2023 was a cheaper month for energy costs.
Consumers, however, should take seasonal variations into account. For instance, the largest jump in airfares since August could be attributed to the holiday travel season. BLS doesn’t seasonally adjust all of its items, and year-over-year inflation rates can better smooth out those variations.
According to BLS, these are the prices that increased most over the past month:
| Item | November 2024-December 2024 increase |
|---|---|
| Gasoline, unleaded regular | 4.6% |
| Fuel oil | 4.4% |
| Women’s outerwear | 4.3% |
| Airline fares | 3.9% |
| Gasoline, unleaded premium | 3.9% |
| Gasoline, unleaded midgrade | 3.8% |
| Other intercity transportation | 3.7% |
| Women’s dresses | 3.6% |
| Eggs | 3.2% |
| Frozen fish and seafood | 3.1% |
Why is inflation still hot right now?
Consumers might look at the massive increase in egg prices and wonder why the overall inflation rate is just 2.9 percent. To put it simply, the Bureau of Labor Statistics assigns weights to each individual good or service it tracks, based on how prevalent it’s considered to be in a consumer’s monthly budget.
Currently, the main contributors to inflation are: shelter, transportation services and motor vehicle insurance.
- Shelter accounted for more than half (or 57 percent) of the annual 2.9 percent increase in November.
- Food accounted for about 12 percent of inflation over the past 12 months.
- Energy accounted for about 43 percent of the month-over-month increase in prices between November and December.
- Motor vehicle insurance is responsible for roughly 11 percent of the increase in inflation over the past 12 months.
Excluding food, energy and shelter, prices would’ve increased about 1.9 percent from a year ago, below the Fed’s preferred 2 percent goalpost.
The drivers of inflation have changed dramatically since the initial post-pandemic price burst. When price pressures peaked in June 2022, shelter was driving just 20 percent of the annual increase in prices. But as consumers emerged from lockdowns with massive pent-up demand at the same time as global supply shortages, energy was driving about a third (32 percent) of inflation, while food prices were driving 15 percent of inflation.
Supply chains have untangled since the pandemic, helping take the pressure off of goods inflation. However, services such as rent, insurance and even the price of dining out can take months, if not years, to fluctuate — depending on what’s happening with labor costs and consumer spending.
To combat inflation, officials on the Federal Reserve lifted borrowing costs from a rock-bottom level of near-zero percent to a 23-year high of 5.25-5.5 percent. Now, borrowing costs are in a target range of 4.25-4.5 percent.
Post-pandemic inflation: What’s risen the most and what’s gotten cheaper
Of the nearly 400 items BLS tracks, just 22 (or roughly 6 percent) are cheaper today than they were pre-pandemic.
To be sure, prices are expected to rise in the healthiest of economies — though only gradually, at a goalpost of around 2 percent a year.
According to BLS, these are the top 10 items that have jumped the most in price since the pandemic:
| Item | February 2020-December 2024 increase |
|---|---|
| Eggs | 87% |
| Motor vehicle insurance | 52.2% |
| Frozen noncarbonated juices and drinks* | 50.9% |
| Motor vehicle repair | 50.5% |
| Margarine | 50% |
| Other fats and oils, including peanut butter | 46% |
| Uncooked beef roasts | 45.6% |
| Delivery services | 40.8% |
| Cigarettes | 40.7% |
| Fats and oils | 40.4% |
| *Denotes an item that isn’t seasonally adjusted | |
Meanwhile, the items that have dropped in price the most since the pandemic are primarily goods and electronics — largely thanks to improving supply chains.
| Item | February 2020-December 2024 decrease |
|---|---|
| Smartphones* | -57.8% |
| Telephone hardware, calculators, and other consumer information items | -48.6% |
| Information technology commodities | -27.1% |
| Televisions | -24.9% |
| Education and communication commodities | -23.2% |
| Computer software and accessories* | -18.3% |
| Health insurance* | -17.2% |
| Other video equipment | -14.3% |
| Video and audio products | -13.5% |
| Computers, peripherals and smart home assistants | -11.3% |
Inflation breakdown by product category
Looking for an easy analysis of how inflation is impacting the key items in your budget? Here’s what Bankrate found.
The different methods of measuring inflation: PCE versus CPI
Fed policymakers look at the full picture of economic data when setting interest rates. But officially, they prefer a different measure to see whether they’re succeeding at controlling inflation: the Department of Commerce’s personal consumption expenditures (PCE) index.
But that preference has been keeping Fed watchers on their toes. Lately, the PCE index has been indicating slower inflation, with overall prices now just three-tenths of a percentage point above the Fed’s target (2.4 percent as of November 2024, versus 2.7 percent in the same month for CPI). Excluding food and energy, “core” prices in November are up 2.8 percent from a year ago versus 3.3 percent in BLS’ gauge that month.
Those variations have always been afoot. Mainly, they’re because of methodology differences. For starters, PCE takes consumers’ substitutions into account (for example, one family’s decision to buy fish over meat for one month because it’s cheaper).
But another key difference is to blame lately. Both agencies estimate an item’s relative importance differently, with BLS’ gauge giving the most weight to the category of inflation that’s coincidentally been the hottest: shelter.
For Fed officials, the story remains largely the same: Inflation has majorly improved since peaking at a 40-year high back in 2022 but is still stubborn.
Takeaways for consumers
Slowing inflation has given the Fed room to cut interest rates and consumers a chance to recover some of the purchasing power that they lost. Even so, prices are still higher today than they would’ve been had the pandemic not occurred, underscoring one of the reasons why Americans might still be feeling some sticker shock.
- Even after the Fed’s rate cuts, borrowing costs are bound to remain historically high: The U.S. central bank’s key benchmark interest rate is still the highest since before the financial crisis — keeping borrowing costs elevated on the products consumers pay, from credit cards and auto loans to home equity lines of credit (HELOCs).
- Comparison shop as much as you can: Consumers know to compare offers from multiple lenders before locking in a loan. Why not the same for the items you buy on a regular basis? Compare prices at multiple retailers, see if any stores offer price match and craft a budget. If a product or ingredient pushes your spending goal over the edge, consider swapping it out for something else.
- Use the personal finance tools at your disposal: Finding the right credit card that helps you earn rewards on the purchases you were already going to make can be another way to pad up your wallet. Just be sure you’re not carrying a balance. A 20.18 percent interest rate will never outweigh the cash back.
- Save for emergencies and find the right account: Historically, investing in the markets has been the best way to beat inflation, but higher rates mean savers can find a market-like return without any of the risk. Deposit rates have already fallen now that the Fed is cutting rates, but returns on high-yielding accounts are still beating inflation. Stash your cash in a high-yield account or add a certificate of deposit (CD) to your portfolio, so you can lock in these elevated yields for the long haul.
See how all items BLS regularly tracks have changed over time
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