Inflation is still reaching for that 3 percent rate

The graph shows inflation (blue) and unemployment (red) from May 2023 thru August 2025. The black line shows the interest rate that the Fed moves up or down to influence inflation and unemployment. The interest rate shows weekly data thru September 3. Next week, at FRED, the interest rate may change.

Inflation (blue), Unemployment (red), and the Interest Rate (black): 2023-05-01 to 2025-09-03
Click the image for a bigger version. Click this text to see the graph at FRED.

At a glance, the red and blue line form an "X" pattern: The red line is trending upward and the blue is trending down. The changes are not big ones, but the red line starts out below the blue line, and ends up above it.

Unemployment (red) shows a trend of increase for almost the whole time the interest rate (black) sits at the high level. We might say that as the interest rate comes down (2024-09 to 2025-01 on the graph) the red line runs flat or tries to go down a little. But after 2025-01, with the interest rate unchanged, unemployment was again rising. This suggests to me that at its current level, the interest rate is too high.

The  Federal Reserve uses a 2 percent target for inflation: They try to keep inflation close to a 2 percent annual rate. 2 percent is at the bottom edge of the plot window on the graph, and on the left-side scale. As the graph shows, the Fed has not been able to bring inflation down to the target level. If they tried harder, unemployment would increase more. I think the Fed is trying to avoid that outcome.

The new BLS data, out today, reports that the CPI "rose 2.9 percent over the last 12 months". Again, almost 3 percent, and still trying to get to 3 percent. This is not the Fed's doing. Not Trump's doing either, I  think, as inflation has been stubbornly refusing to go below 3 percent since July 2023. It is the result of economic forces. That's what I think. The fundamentals of our economy are not really strong. That's what I think. Too much debt: too much private-sector debt. That's what I think.