Prices & purchasing power — United States · Synthesis

Inflation back near target. The consumer price index (CPI) rose by around 2.9% on average in 2024 (BLS), after the 2022 peak (≈ 8.0%, the highest since the early 1980s) and 2023 (≈ 4.1%). The PCE index, favored by the Federal Reserve, has returned to around 2.5%, close to the 2% target.

A durably higher price level. As elsewhere, disinflation (a slowdown in the rise) has not erased the price increase accumulated since 2021. The cost of food, housing and insurance in particular remains well above its pre-pandemic level — which explains the gap between the statistics and household perception.

Housing, a heavy and rigid component. The housing item (rents and imputed rents) weighs heavily in the CPI and receded more slowly than energy or goods. Its gradual decline is a key determinant of inflation returning toward target (see Housing category).

Real wages recovering. Nominal wage growth outpaced inflation in 2024, restoring purchasing power after the 2022 erosion (see Labor category). The catch-up was proportionally sharper for low wages over the recent period.

A front-rank political issue. The "cost of living" was one of the dominant topics of the public and electoral debate. The perception of high inflation, fueled by the price level of everyday products, persisted even as the inflation rate receded — a classic gap between flow (rate) and stock (level).

The "last mile" toward 2%. Durably bringing inflation back to target assumes the continued decline of housing and services, which are more rigid. The Federal Reserve adjusts its policy accordingly — an analytical horizon, not realized data.

Tariffs and prices. Trade policy (tariffs on imports, notably Chinese ones) is a potential factor in raising certain prices. Its magnitude and its pass-through to consumer prices are debated among economists.

Energy and supply chains. Energy prices and the resilience of supply chains (semiconductors, freight) remain sources of uncertainty, in an uncertain geopolitical context.

Purchasing power and inequalities. The rebuilding of purchasing power depends on the pace of real wages and the prices of non-discretionary spending (housing, health, food), which weigh more heavily on lower-income households (see Social cohesion category).

The open questions. Three issues will shape the period: (1) anchoring inflation at 2% without triggering a recession; (2) containing the prices of housing and health, the heaviest items; (3) reducing the gap between measured disinflation and household perception.

Placed in their environment, the United States experienced an inflation shock comparable to Europe's, followed by a somewhat earlier disinflation, in an economy that remained more dynamic.

Three takeaways. (1) A high peak. American inflation reached ≈ 8% in 2022, at a level close to Germany, the United Kingdom and the EU average, and well above Japan, long in near-stagnation of prices.

(2) An early disinflation. Thanks to the Fed's rapid monetary tightening, American inflation returned near target somewhat before several European economies, without triggering a recession — a notable "soft landing."

(3) The Japanese case. Japan, emerging from decades of very low inflation, saw prices accelerate in an unprecedented way (≈ 2.7% in 2024), a movement of a different nature — the exit from chronic deflation rather than an overheating shock.