August inflation came in at 2.9%, up slightly from July’s 2.7% — the highest annual inflation rate in eight months, and the fourth consecutive month of increase. To put it in context: over the most recent five years (60 months), inflation averaged 4.4% with a median of 3.4%. So at least it’s still below the five-year median.
Is 2.9% Good?
It depends entirely on the timeframe you use as your benchmark.
| Time Period | Average Inflation | Median Inflation |
|---|---|---|
| Last 5 years (COVID era) | 4.4% | 3.4% |
| Last 25 years | 2.6% | 2.3% |
| Last 75 years | — | 2.9% |
| Pre-COVID 20 years (2000–2019) | 2.1% | 2.1% |
Viewed against the last 25 years, 2.9% looks less reassuring — above both the average and the median, though not alarmingly so. Against the full 75-year median, it’s exactly in line. The honest answer is: “meh.” And yet, from the people I speak to, today’s inflation feels much more problematic than the numbers suggest. What explains that?
The Context That Explains Everything
The 20-year period immediately before COVID (2000–2019) averaged 2.1% inflation with a median of 2.1%. The fact that the average and median were identical speaks to how extraordinarily stable that period was — to say nothing of how low. It was, in fact, the lowest 20-year inflation value in 100 years.
The COVID spike in inflation came immediately after the lowest, most stable period of inflation in the past 100 years. Even if the spike wasn’t severe in historical terms, it’s entirely understandable why modern consumers experienced it as a shock.
Even including the COVID years, the full 25-year period remains the lowest-inflation quarter-century in 75 years. Only the years 1925–1940 showed a lower average — and only because of significant deflation during the Great Depression.
Where We Stand Today
To summarise the arc of 21st-century inflation:
- Pre-COVID (2000–2019): Steady and historically low — the most stable inflation environment in a century
- COVID spike: Elevated for just over two years
- April 2025: Had fallen back to the 25-year median
- August 2025: Back up to 2.9% — the highest rate since January 2025, and rising for four consecutive months
The Question That Matters Now
With the full impact of tariffs still working through the economy, it’s fair to ask: how high will inflation go?
The trajectory — four consecutive monthly increases, tariff-driven cost pressures, and ongoing geopolitical uncertainty — suggests the downward trend that brought inflation back toward historical norms may have stalled. For businesses building budgets and forecasts right now, locking in a single inflation assumption feels increasingly risky. Scenario planning around a range of outcomes is more important than ever.