US inflation is back at 4 percent while China's sits near zero

Key takeaways

US consumer prices rose 4.17 percent in the year through May 2026, the first reading above 4 percent since May 2023. Households are again losing buying power at more than double the Federal Reserve's 2 percent target.
China posted 0.06 percent inflation in 2025, its third consecutive year below a quarter of a percent. The world's two largest economies are running roughly four points apart.
The bond market has repriced for it: the 10-year Treasury yield climbed from 4.14 percent in December to 4.57 in July, which keeps mortgage and business borrowing costs up while the Fed cuts.

What's happening

The US Consumer Price Index accelerated through the first half of 2026: the annual rate ran 2.39 percent in January, 3.29 in March, 3.78 in April, and 4.17 in May before easing to 3.46 in June. The index level strips out the month-to-month noise. Prices rose 2.0 percent in the six months from December to June, a 4.05 percent annualized pace, after every month of 2025 came in below 4 percent.

China is moving the other way. Its annual inflation rate came in at 0.23 percent in 2023, 0.22 in 2024, and 0.06 in 2025: three straight years of nearly flat consumer prices while the US reaccelerated.

4.05%

The annualized pace of US consumer price growth over the first half of 2026, from an index level of 326.0 in December to 332.6 in June. Every month of 2025 came in below 4 percent.

What 4 percent inflation costs households

At a 4 percent pace the price level doubles in about 18 years. At the Federal Reserve's 2 percent target it takes about 35. The difference compounds quietly: cash savings, fixed pensions, and any wage that lags the index lose ground twice as fast at the current pace as they would at target.

It also works against anyone waiting for cheaper credit. As we showed in our analysis of the Fed's cutting cycle, the 10-year Treasury yield sets mortgage and business borrowing costs, and it has risen since the cuts began. Inflation running near 4 percent gives bond investors little reason to accept lower yields, so the cost of borrowing stays where it is even as the policy rate falls.

What the long chart shows

Since 1980, US annual inflation has exceeded 4 percent in 11 of 45 years, and they cluster in two eras: 1980 through 1991, and 2021 through 2023. The median year over that span came in at 2.93 percent. The recent episode peaked at 8.98 percent in June 2022, cooled to 2.95 percent for full-year 2024, and is climbing again.

China's curve runs the opposite arc. Its inflation peaked at 24.26 percent in 1994, settled into low single digits by the 2010s, and has averaged 1.65 percent since 2012, with 8 of the last 14 years below 2 percent. Through the 2010s the two economies moved roughly together. After 2021 they split: the US spiked and is reaccelerating, China slid toward zero.

What to watch

Six monthly prints remain in 2026. If the first-half pace holds, 2026 would be the first calendar year above 4 percent since 2023. On the China side the question is the sign: at 0.06 percent, 2025 was one weak quarter from an outright annual decline in consumer prices. And the 10-year yield remains the transmission line, because a bond market that believes inflation is settling near 4 will keep long rates, and with them mortgage rates, near where they are.

Common questions

What is the US inflation rate right now?

The CPI rose 4.17 percent in the year through May 2026 and 3.46 percent in the year through June. Over the first half of 2026 prices rose at a 4.05 percent annualized pace, up from 2.95 percent for full-year 2024.

When was US inflation last above 4 percent?

May 2023, at 4.13 percent on the monthly measure. On annual averages, 2021 through 2023 all exceeded 4 percent, peaking at 8.0 percent in 2022.

Why is inflation so low in China?

China's consumer prices have been nearly flat for three years: 0.23 percent in 2023, 0.22 in 2024, and 0.06 in 2025. This extends a long pattern rather than breaking from one. Since 2012 Chinese inflation has averaged 1.65 percent, with 8 of the last 14 years below 2 percent.

Is 4 percent inflation high by historical standards?

It is elevated but far from the extremes. US annual inflation has exceeded 4 percent in 11 of the 45 years since 1980, and the median year came in at 2.93 percent. It is more than double the Federal Reserve's 2 percent target.

Data: US Consumer Price Index (FRED series CPIAUCSL, monthly, shown as year-over-year percent change on the chart) and annual consumer price inflation for the United States and China (World Bank series FP.CPI.TOTL.ZG, 1960 and 1987 to 2025), as published in the Kitegraph library. The chart window starts at 1980. Half-year and annualized figures are computed from the monthly index levels.