Throughout the COVID-19 pandemic, the Federal Reserve Bank and Congress have taken unprecedented steps to stabilize the economy after entire industries and sectors ground to a halt last year amidst the public health crisis.

The Fed has kept interest rates near zero, created lending programs to pump trillions of dollars into the economy, and bought securities to support financial markets. And Congress passed three major COVID-19 stimulus packages in response to the crisis: the $2.2 trillion CARES Act in March 2020, the $900 billion Coronavirus Response and Relief Supplemental Appropriations Act in December 2020, and the $1.9 trillion American Rescue Plan in March 2021.
These actions helped American households and businesses weather the pandemic in better financial shape than many would have predicted when COVID-19 lockdowns began last March. While millions remain out of work and many businesses have shuttered or remain on the brink, some sectors of the economy easily adapted to COVID-19. Many households — especially higher earners — saw their wealth grow from increased savings, robust government stimulus, and strong stock market returns.
And as life in the US returns to normal amid declining COVID-19 case numbers, pent-up demand looks poised to lift hard-hit sectors like retail, tourism, and hospitality this summer. However, certain investors, economists, and other experts have begun to express fears that the unusual conditions of the COVID-19 economy and large amounts of government stimulus are bringing on a new economic challenge: inflation.
These observers worry that the amount of money in the economy and quickly recovering demand in many sectors will push prices higher throughout this year. One of the primary measures used to track inflation is the Consumer Price Index, which is based on prices for food, clothing, shelter, fuels, transportation fares, service fees, and sales taxes.
The index measures price changes as a percentage from a predetermined reference date to recognize periods of inflation and deflation. Based on data from 2021, the CPI is showing a steep upward trend in prices, an indication that inflation is on the rise. April 2021 saw a 4.2% increase in price year-over-year, the largest single-month increase since before the markets crashed in 2008.