Five charts explaining why inflation is at a 40-year high

The bumpy economic recovery has had policymakers, economists and Americans households grappling with greater price hikes for groceries, cars, rent and other essentials.

The latest inflation data, released by the Bureau of Labor Statistics, showed that prices in March climbed 8.5 percent compared with the year before, the highest measure in over 40 years.

The Federal Reserve has launched a major series of interest rate increases to get inflation under control, penciling in seven hikes by the end of the year. But it’s unclear how quickly that action will be able to bring down the rising cost of living, or if the Fed will be spurred to even more aggressive action that risks thrusting the economy into a recession

Persistent supply chain backlogs and high consumer demand for goods have kept prices elevated. And more recently, Russia’s invasion of Ukraine has strained global energy markets and triggered higher gasoline prices. There is no clear answer for when that will change, leaving Americans to feel the strain in their pocketbooks in the meantime. This is a breakdown of how we got here.

Economists caution against drawing too much from one month of data, good or bad. But policymakers have been forced to acknowledge that inflation is larger and more persistent than they expected early last year, with little sign of a turnaround. The risk, too, is that the more broad-based and embedded high prices become, the harder it will be to rein them in.

“The expectation going into this year was that we would basically see inflation peaking in the first quarter, then maybe leveling out,” Fed Chair Jerome H. Powell said in March. “That story has already fallen apart. To the extent that it continues to fall apart, my colleagues and I may well reach the conclusion that we’ll need to move more quickly.”

Policymakers initially argued that price increases were limited to industries like hotels, airlines and cars. But federal data shows broad-based higher prices, propelled by shelter, energy and used vehicles. Prices for household furnishings and operations, apparel and new vehicles have also gone up.

The concerns over soaring home prices and rising rents have economists worried about whether cost increases will last even after the coronavirus pandemic has mostly passed. The still-hot housing market has made it that much more difficult for first-time buyers, or those without cash or solid credit, to buy a home. Meanwhile, rising rents in major metropolitan areas are pushing out more people who are now wondering if they can afford to stay.

On top of it all, Russia’s invasion of Ukraine has triggered even higher energy prices, leaving many Americans with sticker shock at the gas pump. The White House points to its recent moves to lower prices, including through the release of 1 million barrels a day from the nation’s Strategic Petroleum Reserve and an emergency waiver to allow use of blended biofuels.

Families across the nation are also facing higher prices at the grocery store and could see more of a pinch if Russia’s invasion causes widespread shortages of wheat, corn and other items. People are also stretching their wallets for dairy, fruits and vegetables, baked goods and meats.

Throughout the pandemic, new and used cars have been a kind of litmus test for the country’s supply chain issues and related price hikes. Used cars and trucks were a driving force behind the surge in inflation last year.

The market relies heavily on trade-ins and auto parts, which have been in low supply during a global microchip shortage. That pinch has made it more expensive for dealers to get any of their models, much less repair them. All of those problems are also hurting the supply of used cars, which depend on trade-ins as well as rental car company inventories.

Data is from the Labor Department. Laura Reiley contributed to this report.