This video is part of our series “The Numbers That Defined 2022.”
Monica Potts: One of the most important numbers of 2022 was 9.1 percent. That was the inflation rate in June — the highest yearly increase since 1981.
Inflation affected all Americans, but its severity varied by region. And as you might expect, low-income families were hit the hardest. Many struggled to afford basics like food and rent. A report from The Urban Institute found that about 1 in 5 adults experienced household food insecurity this summer, which matched heights reached early in the pandemic.
High prices changed the ways families made decisions both big and small. As the prices of goods rose, especially in the summer, families shifted their spending to buy cheaper brands and drove less. Increasing pet food costs may have led to fewer families adopting pets and more pets being relinquished to shelters. Some families downgraded their summer vacations. And Americans spent their savings, and saved less.
Inflation has since cooled a bit, but as of November, consumer prices were still 7.1 percent higher than they were at the same time last year. And that’s affected the way families are celebrating the holidays. In a poll from before Christmas, 57 percent of those surveyed said that it was harder to afford the gifts they wanted to buy, up from 40 percent the year before. And 11 percent of respondents in another poll said they anticipated taking on some amount of debt for their holiday shopping.
To control this high inflation, the Federal Reserve raised its benchmark interest rate more than 4 percentage points over the course of the year, to the highest point in 15 years. Most observers agree that’s likely to cause a recession. What’s less clear is how bad it will be, and whether it curbs inflation as it’s intended to do. These are the unknown questions 2023 is poised to answer, and why the inflation rate is one of the most important numbers of the past year.