NEW YORK — Aquan Brunson, 45 and from Brooklyn, used to buy three slices of cheese pizza from 99 Cents Pizza of Utica for lunch each day. But about three months ago, inflation ate away that third slice. The shop has pasted over its old sign to alert customers that it is now “$1.50 Hot Pizza.”

“The dollar doesn’t take us far,” said Brunson, patting his greasy lunch down with paper napkins on a gray December afternoon. “The cost of everything is going up.”

Consumers across the country can tell you that inflation has been high this year, evidenced by more expensive used cars, pricier furniture and the demise of New York City’s famous $1 slice. But until recently, policymakers in Washington responded to it with a common refrain: Rapid price increases were likely to be transitory.

Last week, policymakers said it was time to retire the label “transitory” and acknowledged that the price increases have been proving more persistent than expected.

Jerome Powell, the Fed chair, said that while his basic expectation is that price gains will cool off, there is a growing threat that they will not do so soon or sufficiently.

“I think the risk of higher inflation has increased,” he said.


A fresh report set for release Friday is expected to reinforce that concern. The Consumer Price Index could show that inflation picked up by 6.8% over the past year, the fastest pace in nearly 40 years. More worrisome for the Fed is that inflation is broadening to many products and services, not just those directly affected by the supply chain woes.

Here is a rundown about what to know about the price pops, and what to expect when new U.S. consumer price inflation figures are released.

Inflation measures price increases

When economists and policymakers talk about “inflation,” they typically mean the increase in prices for the things that people buy out of pocket — tracked by the Consumer Price Index, or CPI — or the change in the cost of things that people consume, which is tracked by the less-timely Personal Consumption Expenditures index.

Both measures are way up this year, and CPI data is expected to show that inflation picked up by the most since 1982. Back then, Paul Volcker was the Fed chair, and he was waging a war on years of rapid price gains by pushing interest rates to double digits to cool off the economy. Today, interest rates are set at nearly zero.

Price gains are becoming broader

There are plenty of differences between 1982 and today. Inflation had been low for years leading up to 2021, and pandemic-era lockdowns are behind much of the current price pop.

Consumer demand surged just as rolling factory shutdowns and a reshuffle in spending to goods from services caused manufacturing backlogs and overwhelmed ports. That is why policymakers were comfortable dismissing high inflation: It came from kinks that seemed likely to work themselves out.


But price gains are increasingly coming from sectors with a less clear-cut, obviously temporary pandemic tieback. Rents, which make up a big chunk of inflation, are rising.

“Housing — that is the key broadening,” said Laura Rosner, an economist at MacroPolicy Perspectives.

The potential for wider and more lasting price pressures have put Fed officials on edge. Policymakers at the central bank, who had been tiptoeing away from supporting the economy, broadcast last week that they are preparing to speed up the retreat.

Supply chain snarls are lasting

Disruptions to the global flow of goods are not fading as quickly as policymakers had hoped. Additional virus waves have kept factories from running at full speed in Asia and elsewhere. Shipping routes are clogged, and consumers are still buying goods at a robust pace, making it hard for the situation to normalize.

“The earliest we see things normalizing is really the end of 2022,” said Phil Levy, chief economist at the logistics firm FlexPort. When it comes to misunderstanding inflation, he said, “part of the problem is that we treated the supply chain like it was a special category, like food or energy.”

But as 2021 has made inescapably clear, the global economy is a delicately balanced system. Take the car industry: Virus-spurred semiconductor factory shutdowns in Taiwan delayed new car production. Given the dearth of new autos, rental car companies had to compete with consumers for previously owned vehicles, leaving shortages on used car lots. The chain reaction pushed prices higher at every link along the way.


Another thing that could keep inflation high? Wages are climbing, and some companies are considering passing those expenses on to customers, who seem willing to pay more. The Employment Cost Index, a measure the Fed watches closely, picked up notably in the three-month period that ended in September.

The risk is that this is an early and still dim echo of the kind of wage-and-price dynamic that helped to fuel higher prices in the 1970s and 1980s. Back then, unions were a much more powerful force, and they helped to make sure pay kept up with rising prices. Inflation and wage gains pushed each other into an upward spiral.

In the years since, workers have typically had less bargaining power. But employers are contending with labor shortages as the virus keeps many would-be employees on the sidelines. That is giving workers the ability to command higher pay, which could keep demand solid by bolstering peoples’ wherewithal to spend.

Brunson — the pizza aficionado — works at a grocery store. They have raised his pay, he said, but it is not enough to keep up with climbing cost of food and other expenses.

“They gave us an extra dollar, but that’s just to offset the inflation,” he said. He and his family, three adult children who live with him, are coping by cutting back.