It’s the question that dominated every trip to the grocery store for four years. You’d look at a dozen eggs or a gallon of milk, glance at the receipt, and wonder if your math was somehow wrong. It wasn't. Prices were moving fast.
Basically, what was inflation under Biden is a story of a world trying to restart itself after a total freeze. When Joe Biden took the oath of office in January 2021, the year-over-year inflation rate was a sleepy 1.4%. People were more worried about finding a vaccine than the price of bacon. But the quiet didn't last. By the time he left office, the cumulative price increase for his entire term sat at roughly 20%.
That is a massive number. It’s the kind of number that changes how people live their lives.
The 9.1% Peak and the "Transitory" Trap
Early on, the administration and the Federal Reserve kept using the word "transitory." They figured the price spikes were just a temporary hiccup as factories shook off the rust. They were wrong.
By June 2022, inflation hit a staggering 9.1%. That was a 40-year high. If you lived through it, you remember the "sticker shock."
Everything hit at once. You had the American Rescue Plan, which dumped $1.9 trillion into the economy while people were still stuck at home. Demand went through the roof. At the same time, the "Just-in-Time" supply chain turned into a "Not-at-All" supply chain. Ships were backed up in California, and computer chips were nowhere to be found.
Then, Russia invaded Ukraine in February 2022. That sent energy and food markets into a tailspin. Gas prices in the U.S. eventually averaged over $5.00 per gallon in June 2022. It was a perfect storm of policy, pandemic leftovers, and global conflict.
Did the Inflation Reduction Act Actually Work?
Honestly, the name was a bit of a marketing move. The Inflation Reduction Act (IRA) of 2022 was mostly a massive climate and healthcare bill.
Most economists agree its immediate impact on the "inflation" you feel at the checkout counter was pretty small. Its goal was more about long-term costs. It allowed Medicare to negotiate drug prices and capped insulin at $35. For a senior on a fixed income, that felt like lower inflation. For a 30-year-old buying a used car? Not so much.
The heavy lifting was actually done by the Federal Reserve.
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The Fed realized they were late to the party and started cranking interest rates. They moved the federal funds rate from near zero to over 5.25% in a little over a year. It was a blunt instrument. It made mortgages expensive and car loans painful, but it worked to cool the economy down. By late 2024 and early 2025, inflation had finally cooled back toward the 2.7% to 3% range.
The Real Wage Gap: Why You Still Felt Broke
Even when the rate of inflation started to drop, prices didn't actually go down. They just stopped rising so fast. This is a distinction that drives people crazy.
Under Biden, wages grew significantly—about 19.9% on average. That sounds great until you realize prices grew 21.5%.
- Real Wages: After you adjust for those price hikes, the average worker's purchasing power actually fell by about 1.3% over the four years.
- The Squeeze: This is why people felt so sour about the economy even when the unemployment rate was at historic lows. You had a job, but that job bought less stuff than it did in 2020.
Looking Back: Was it Specific to Biden?
If you look at the UK or Germany during the same period, they had it worse. Some European countries saw inflation hit 10% or 11% because they were even more dependent on Russian gas.
But the U.S. also spent more on stimulus than almost anyone else. MIT researchers and the San Francisco Fed have estimated that the domestic stimulus (from both the final Trump package and Biden’s first big bill) probably added about 3 percentage points to the peak inflation rate.
It was a trade-off. The U.S. avoided a deep recession and kept unemployment under 4% for the longest stretch since the 1960s. But the price of that "soft landing" was four years of the highest inflation most of us have ever seen.
Actionable Takeaways for the Current Economy
Now that the Biden era is in the rearview, the landscape has shifted, but the "higher for longer" reality of prices remains. Here is how to navigate the aftermath:
- Refinance Watch: With the Fed beginning to cut rates in 2025 and 2026, keep a close eye on mortgage rates. If you bought a home during the 7% peak, you might finally have a window to shave 1-2% off your rate.
- Audit "Service Inflation": While goods (like TVs and clothes) have leveled off, services (car insurance, repairs, and healthcare) are still sticky. Re-shop your insurance policies annually; the "loyalty tax" is real right now.
- Yield is Still King: Even as rates dip, high-yield savings accounts and CDs are still offering much better returns than they did in the 2010s. Don't let your cash sit in a 0.01% big-bank checking account.
- Wage Negotiation: Because the labor market stayed tight through the inflationary spike, many sectors still have "catch-up" raises on the table. If your pay didn't go up by 20% since 2021, you're technically making less than you were four years ago. Use that data in your next review.