Hyperinflation

What Is Hyperinflation?

Hyperinflation is extremely rapid, out-of-control inflation - so fast that money loses value by the day. A common technical benchmark defines it as inflation exceeding 50% per month, a pace at which prices can more than double in the course of a few weeks. At that speed a currency effectively stops functioning as a reliable store of value or unit of account. Hyperinflation sits at the far extreme of the inflation spectrum, orders of magnitude beyond even the roughly 13-14% year-over-year inflation the United States experienced at the peak of the 1970s-early 1980s Great Inflation, which was severe by U.S. standards but nowhere near hyperinflation.

Why It Matters

Hyperinflation matters as the catastrophic endpoint of what runaway prices can become, and it explains why central banks treat price stability so seriously. Historical episodes in various countries have shown money becoming nearly worthless, wiping out savings and forcing people to spend wages almost the moment they are paid. The United States has never experienced true hyperinflation, and the Fed's institutional commitment to a low, stable 2% target is designed to keep expectations anchored so that inflation never begins to spiral. Understanding hyperinflation also clarifies the vocabulary: the roughly 9% U.S. inflation of 2022 was painful and well above target, but it belonged to an entirely different category.