The latest data shows that the US CPI increased by 8.5% year-to-year in July，and the month-on-month growth was flat. The CPI slowed down for the first time in two years，but remained high in the short term. From the perspective of the four major driving forces of the US inflation，the slowdown in global economic growth has quelled high oil prices，and the repair of supply chains has pushed down the prices of manufactured goods and food. However，the rising shelter cost has supported the strong demand for rents，and the hot job market has been bringing higher income and more demand. Looking ahead，a number of factors affecting the trend of inflation，including the impact of geopolitical conflicts on commodity prices，the reallocation of global industrial and supply chains，and the impact of economic recession on new employment and rental demand. Given that inflation is one of the core concerns of the Federal Reserve，it is important to further understand how it moves.

The US inflation is rising at an unprecedented pace

Since the first quarter of 2021，the CPI in the US has risen rapidly from less than 2% to 8.5% in July this year，among the strongest increase in more than 40 years. As a result，the Federal Reserve was forced to admit that monetary policy measures has lagged behind the market，and initiated the fastest rate hike since the tech bubble in 2001. From January to July this year，the Fed has raised interest rates by 225 basis points.

In regards to specific indicators，the widely used are PCE index and CPI. The weights that make up the sub-items of PCE index change quarter by quarter，and this makes PCE index the main policy reference for the Fed. In 2012，the Fed set a long-term inflation target of a 2% increase in core PCE. Although the inflation rate calculated by CPI is often higher and more volatile than PCE，considering that the Consumer Price Index for All Urban Consumers (CPI-U) is still widely used in financial market and cost adjustment and measures changes in US consumer prices based on a representative basket of goods and services. In this paper，CPI-U (hereinafter referred to as CPI) is taken as an example for analysis. Based on representative groups，CPI can be referred to CPI-W (covering the wage earners) and CPI-U (covering all workers). The latter covers a wider group and is the main concern of the market. Table below describes the comparison of sub-items between CPI and PCE index.