What You Need to Know About Inflation

Francesco D’Acunto, PhD, Wealthfront Investment Advisory Board member and Georgetown professor

Inflation affects all of us—and not just in the ways you might expect. That’s why we asked Wealthfront Investment Advisory Board member Francesco D’Acunto, a Georgetown Professor and published expert in the field, to answer our questions about this important topic that’s been making headlines.

What’s going on with inflation today?

From its peak of 6.6% in September 2022, Core CPI inflation declined steadily for a while, reaching 2.7% in May 2025. However, inflation rose above 3% again in July and August.

What happened? US retailers are coming to terms with tariffs, and are gradually increasing prices in order to reduce the hit to their profits. If this pattern continues, we’re likely to see inflation increase further in the coming months.

What are some ways that inflation affects consumers? 

The most well-known effect is that when inflation rises, the cost of goods and services also goes up. People usually focus on the negative effects of inflation, but they may not realize it has a surprising benefit: Inflation reduces the value of debt consumers owe to lenders. This benefit applies to people who hold debts such as mortgages, car loans, student loans, or medical loans. 

When consumers take on these debts, they receive a lump sum up front to purchase an asset (house, car, etc) that is valued at the time of purchase. In return, they agree to repay a fixed amount, typically on a monthly basis, that does not change over time (assuming it’s a fixed-rate loan). As inflation rises, the dollar value of the purchased asset also goes up. However, the monthly repayments remain constant, based on the original purchase price.

Should consumers be worried about “stagflation?” How is this different from regular inflation, and how can people prepare for this possibility? 

Stagflation is a situation in which high inflation is paired with high unemployment, indicating an economic downturn exacerbated by rising prices. Many consumers think that stagflation is common, because they think that when inflation is high, all the other parts of the economy are also doing badly. In reality, stagflation is relatively rare.

It’s true that some people are concerned about the potential for stagflation in the future. That’s because inflation has started to increase again due to tariffs, while the unemployment rate has also started to increase. At this stage, though, we are far from stagflation. The US unemployment rate is still low (around 4%) and inflation is at a sustainable level.

How can investors factor inflation data into their financial decisions?

Academic research tells us that the best course of action is to keep investing regardless of changes in the macroeconomic environment. The reason is that such changes primarily reflect short- and medium-term business cycle fluctuations, rather than long-term trends, and most people invest to accumulate wealth for the long run.  

Ultimately, for anyone making long-term investment decisions, such as building wealth for retirement or for big expenses like buying a house, the economic information that financial institutions, the media, and politicians monitor closely are less critical than following consistent investment strategies for the long term. 

Take a deeper dive into what inflation means for you on the Wealthfront blog, and don’t forget to subscribe for more future LinkedIn newsletters.

The information contained in this communication is provided for general informational purposes only, and should not be construed as investment or tax advice. Investment management and advisory services provided by Wealthfront Advisers LLC, an SEC-registered investment adviser. Brokerage products provided by Wealthfront Brokerage LLC, Member FINRA/SIPC.