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> Prices are up +4.25% in the past year, and +24.49% in the past 5 years, according to the latest CPI data released Jun. 10, 2026. The price level has approximately doubled (2.01x) today compared to August 1999.

Not knowing if that's good/bad, as it is without any frame of reference, so the same data for Spain looks something like this:

Prices up +3.2% in the past year, up +22.4% in the past 5 years. Compared to 1999, a 1.88× difference, and if you want to compare since when it doubled, it'd be around September 1996. This is according to a tool from INE, Spain’s national statistics: https://www.ine.es/varipc/index.do?L=1

[hadlock]

2% is good, anything over 3% is not good, anything over 4% is bad, 5% and higher is really bad. Hope that clears things up for you.

[neves]

It depends on the country. Brazil, due to its hyperinflation days, has a lot of indexed prices. These are prices that automatically increase due to inflation. This makes the country to have so called inertial inflation, current inflation caused by past inflation, and also makes it more robust to a higher inflation.

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Can you really say that based only on the inflation? What if wages increased 6%, then 3% inflation wouldn't be as bad as if inflation raised 2% but wages only increased 0.1%? At least if you think about purchasing power I suppose. But won't claim to be an expert on this, happy to be educated by those who are :)

[recursivecaveat]

Part of it is just expectations btw. If the value of money is jumping up and down rapidly it is bad for business. Like if I'm going to sell you a 30 year fixed rate mortgage we require an accurate expectation of future inflation for one of us not to effectively lose their shirt on the deal. Imagine shops shuffling their prices up and down constantly, unions renegotiating contracts all the time, you sign up for 12 months of netflix but the price implicitly assumes that money will be worth N% less by month 12, etc. (imo a lot of these things should already be pegged, but people don't like doing that) It's basically just much more annoying to transact using a currency whose future value is unpredictable. So given that 2% is the stated target, which expectations are presumably largely built around, significant deviation is a failure to manage that process.

[anticorporate]

In general, higher inflation has a negative impact on consumer sentiment even if wage growth matches the inflation, which it rarely does.

But the bigger issue is that inflation is generally distributed much more evenly than wage increases. Very few employers offer a COLA that is automatic, so wages almost always trail inflationary pressure.

[tastyfreeze]

The FED says that 2% is good. 2% is not good. Their target of 2% per year means we have 2% compounding annually devaluation of our currency.

[DennisP]

It's fine as long as t-bill rates match or exceed inflation. Then you can avoid losing purchasing power by just putting your money in the world's safest investment. Over the past century, t-bill returns have slightly exceeded inflation on average, though there have been periods when they didn't.

Stash paper cash in your safe and sure, you lose purchasing power. Use fiat money the way it's designed to be used, instead of using it like gold coins, and it works better.

[aidenn0]

Us debt as a fraction of GDP has doubled this century and roughly quadrupled in my lifetime. It would seem to me that eventually t-bills will not be safe.

[DennisP]

True, but that's a different problem and to hedge against that you probably need hard assets.

[throwwwll]

They did double and quadruple before, if you know what I mean.

[xenadu02]

That's by design.

If currency doesn't devalue then stuffing it under a mattress looks like a reasonable alternative to investing. If we hit deflation you can receive gains for "free" and borrowed money becomes more expensive over time. Neither of which our economic system is setup to handle.

We punish people who hoard cash by devaluing it thus encouraging them to put the money to work.

[greyface-]

One side says this design is necessary to sustain growth. The other says it's unfair because the gains from the growth are unevenly distributed. Neither is wrong.

[HDThoreaun]

Why is that not good? When inflation is close to 0 real interest rates increase which causes the economy to slow down. It seems clear to me that the optimal rate of inflation is always above 0.

[dmoy]

The real problem imo is that below 0% is really bad, and has the potential to spiral. So the fed does not target anything close to 0%, but instead targets some buffer above it.

So it's not that "2% is good", but more that "2% is the best buffer we've decided above the <0% super scary threshold"

[HDThoreaun]

Yes of course below 0% is especially bad, but I dont think thats the whole story. If central banks were able to set inflation with 100% certainty I still think targeting a number close to 0% is a bad idea. Nominal interest rates have a floor due to defaults, servicing costs. As inflation approaches 0 that floor is hit and monetary policy loses its ability to control real interest rates. Keeping nominal rates above their floor is key to ensuring small business can obtain liquidity, as the floor is approached it makes less sense for lenders to write small loans.

There are many other reasons a positive inflation rate is better than substantially near 0. One common complaint about inflation is that erodes real wages because nominal wages are sticky, but this is actually a good thing. It gives businesses room to breathe during downturns without cutting nominal wages or having to cut staff. Positive inflation also forces cash into productive uses which helps monetary policy because it keeps the actaul money supply more stable.

[somenameforme]

The Fed did a study some time back estimating CPI levels since 1800. [1] They found that from 1800 to 1950 the CPI never shifted more than 25 points from the starting base of 51, so it always stayed within +/- ~50% of that baseline. That's through the Civil War, both World Wars, Spanish Flu, and much more. And obviously the US economy increased in sized quite exponentially from 1800 to 1950, with no persistent inflation whatsoever.

It's even more interesting to contrast this from 1971 onward. 1971 is when Bretton Woods ended and the government was given a free hand to start 'printing money' so to speak, and inflation became the new policy. Since then the CPI has increased by more than 800 points, 1600% more than our baseline. And it's only increasing faster now - to the point that these numbers I'm giving are already rather outdated.

[1] - https://www.minneapolisfed.org/about-us/monetary-policy/infl...

[HDThoreaun]

The US economy faced repeated economic catastrophes from 1800-1950 largely because the government was unable to enact monetary policy. The long depression of the 1870s happened pretty much solely because monetary supply contracted and populists got elected to fuck with the silver/gold standard. Causes of the great depression are more varied, but contraction of money supply due is certainly one of the leading ones.

Yes, the economy expanded greatly over this period, but you have to separate inflation from many other causes such as innovation, increasing labor supply, better education, increases in the amount of investment. I think its pretty clear that the economy wouldve fared much better in the 1800-1950 period if the government was partaking in monetary policy that focused on small but positive inflation.

[somenameforme]

Check out the data from the Fed and contrast it against events in the past. For instance you mention the long depression which happened from 1873 to 1879 and resulted in a decline in prices of about 30% followed by stabilization. And of course that was also the advent of the Gilded Age, where economic growth, wages, and so on all were skyrocketing, all while prices trended downward! It's difficult to even imagine something like that now a days.

I don't think that's just a coincidence either. Economic issues in the US used to foreshadow booms to come, which makes sense in many ways as it's the ending of one generation of businesses and the start of another. By contrast in the US prices have increased by 30% over almost the same length of time as the 'long depression', and continue going up up and away. It'd be nonsensical to call it the long inflation or whatever because it's only slightly off the normal. 2% 'planned' inflation over the same 7 year period is a 15% increase in prices. And businesses going under? No, everything's huge now, and so everything's too big to fail. The government has taken on the responsibility of perpetually propping up failing businesses, forever inhibiting competition in the process.

And there's no boom waiting at the end, in no small part because there is no end. Each economic issue we face, which are becoming increasingly regular, just further magnifies the divides in society. The wealthy have sufficient assets and resources to turn this into profit, in no small part by dumping excesses of money into inflation resistant assets, but the middle and lower classes have no such option and so mostly just lose either badly or very badly. This [1] site lays out a bunch of the data since 1971 (when the dollar became completely unbacked following the end of Bretton Woods) and impossible not to see it as an enormous inflection point for all sorts of nasty stuff.

---

I suspect if we hadn't had the tech boom kicking off fairly shortly after 1971, driving in a decades long unprecedented economic boom, that this experiment would have long since reached its climatic failure. It only works with infinite exponential growth. For some time we had that. Now we not only no longer do, but also are seeing a fertility collapse at the same time. There's gonna be some fireworks.

[1] - https://wtfhappenedin1971.com/

[kachnuv_ocasek]

Why those arbitrary thresholds?

[JumpCrisscross]

> Why those arbitrary thresholds?

The broad idea is you want a number low enough that people don't price inflation expectations into day-to-day pricing but not so low that a hiccup causes deflation.

The empirical evidence around inflation persistence is a bit all over the place, but broadly suggests people start daily indexing between 2 and 5%. When that starts to happen, restraining inflation without causing a depression becomes incredibly hard, because people will actively countermand policy moves.

[hadlock]

The fed has a dual mandate to maintain full employment and keep inflation at 2%. Others have already explained why 2% and not 0%. Up to 3% is expected, 4% means significant price shocks and they should consider acting quickly. 5% means they are at risk of losing control of inflation as it's more than doubled from their mandate and the fed risks losing credibility with markets

[horsawlarway]

In complete seriousness:

An offhand remark made by New Zealand's Finance Minister, Roger Douglas, during a 1988 television interview.

[HDThoreaun]

Inflation isnt as simple as good/bad. Monetary theory shows us that short term inflation is a good way to counteract spikes in unemployment. Whether you prefer stable inflation with swings in unemployment or stable unemployment with swings in inflation or something in between is a political question.

[thewebguyd]

Which puts central banks in a hard place right now because the problem is supply-side. The dual mandate is a lose-lose situation.