Here’s What You Need to Know About America’s Super-Hot Inflation

Consumer prices increased 8.6 percent in the year through May, the fastest rate of increase in four decades.

Americans are confronted with more expensive food, fuel and housing, and some are grasping for answers about what is causing the price to go up, how long it will last, and what can be done to resolve it.

There are few easy answers or painless solutions when it comes to inflation, which has gone up around the world because of supply shortages and hot consumer demand. It is difficult to say how long the price surge will last, and the main tool for fighting it is interest rate increases.

There is a guide to understanding what is happening with inflation and how to think about price gains.

The causes of inflation can be thought of as falling into three buckets.

• Demand is strong. People are spending a lot of money. Government support helped households put away more money as they were stuck at home in the early part of the epidemic. People are taking jobs and getting raises. All of those factors make it possible for families to spend on everything from backyard grills to cars and kitchen tables.

• There are too few things. Families are having a hard time finding pickup trucks and computer screens because there are not enough goods to go around. Parts-and-products shortages have arisen as a result of factory shutdowns tied to the Pandemic. Companies have been able to charge more without losing customers because of the high demand.

  Supply chain snarls are getting worse because of China. The war in Ukraine is cutting into the world's supply of food and fuel, pushing overall inflation higher and eating into the cost of other products and services. The national average price of gas is $5 a gallon, up from $3 a year ago.

• The service sector is under pressure. As people adjust to life with the coronaviruses, they have been shifting their spending away from things and back to experiences. Rents are climbing quickly as Americans compete for a limited supply of apartments, restaurant bills are going up, and airline tickets and hotel rooms are more expensive because people are eager to travel.

You may be wondering what role corporate greed plays in this. It's true that companies have been making a lot of money as they raise prices to cover rising costs. Consumers are spending right through price increases, which makes it possible for them to do that. Pricing power is not known how long it will last. Target has already indicated that they will reduce prices on some products as they try to clear out inventory and keep customers coming.

The Consumer Price Index and the Personal Consumption Expenditures index are America's two main inflationgauges.

The nation's first clear glimpse at what inflation did the month before can be found in the C.P.I., which comes out earlier. The P.C.E. figures are derived from the data from the index.

Next month, the P.C.E. index will be released. The price of health care procedures is counted when the government and insurance help pay for them. The Federal Reserve looks at the index when trying to achieve 2 percent inflation over time. The P.C.E. index was up more than three times the central bank's target.

Fed officials pay close attention to changes in month-to-month inflation in order to get a sense of its strength.

The core inflation measure removes food and fuel prices from the calculation. While groceries and gas make up a big part of household budgets, they also jump around in price when there is a change in global supply. They don't give a clear read on the underlying inflationary pressures in the economy because they don't think they can do anything about it.

Lael Brain wants to see a consistent string of decelerating monthly prints on core inflation before he is confident that we are getting to the kind of inflation trajectory that will get us back to our 2 percent goal.

It is anyone's guess how long prices will keep going up. Some outcomes seem likely based on the drivers behind the prices.

It's not likely that quick inflation will go away on its own. Wages are increasing more quickly than usual. Unless companies get more efficient, they will probably try to keep prices up.

The Fed is raising interest rates in order to slow demand. The policy response of the central bank means that the economy is going to slow down. Higher borrowing costs are cooling off the housing market.

There is a lot of uncertainty about how much Fed action will be needed to bring inflation under control. The Fed might be able to let the economy go down gently, slowing the job market enough to temper wage growth without causing a recession if America gets lucky.

As supply and demand balance out, companies will be forced to lower their prices and reduce their profits as they compete for customers again.

It's possible that supply issues will persist and leave the Fed with a more difficult task: raising rates more drastically to slow demand and bring prices under control.

Matthew Luzzetti, chief U.S. economist atDeutsche Bank, said that the path to a soft landing is narrow. Consumer spending is not showing much sign of cracking yet.

According to Mr. Luzzetti's team, households still have more than $2 trillion in excess savings.

During a June 7 event, Anthony G. Capuano, chief executive of Marriott International, said that there is still a lot of demand. In previous economic cycles and economic downturns, people were locked down for a long period of time.