Post-pandemic inflation surge and the Fed's tightening cycle

US consumer price inflation rose from around 1.5% in early 2021 to roughly 9% by mid-2022, the highest reading in four decades, as pandemic-era fiscal support, snarled global supply chains, and a rapid rebound in demand for goods collided with a labor market that tightened faster than policymakers anticipated. The Federal Reserve began raising its policy rate in March 2022, when CPI inflation was already near 8%, and proceeded through a historically rapid tightening cycle that lifted the federal funds rate from near zero to above 5% within about fourteen months. Fed officials, including Chair Jerome Powell, repeatedly acknowledged through late 2022 that inflation remained far too high relative to the 2% target even as early rate increases began to show effects, while governors such as Lael Brainard framed the goal as keeping longer-run inflation expectations anchored while bringing price growth back down over time. The episode marked the most aggressive US rate-hiking campaign since the early 1980s and reversed more than a decade of near-zero interest rate policy.