Inflation is here. The most recent Consumer Price Index (CPI) inflation report showed that prices rose across the board in November. By a lot.

Overall, prices climbed 6.8% year-over-year, the largest increase since June 1982, and rose 0.8% over the past month. Higher prices were “broad-based,” per the Bureau of Labor Statistics (BLS), with substantial increases seen in the indexes for gasoline, shelter, food and new and used vehicles.  The gasoline index alone rose 6.1% in November. Of course, those items are key to the basic financial life of normal Americans, thereby stretching their bottom line even thinner.

When you strip out volatile food and energy prices—so-called core CPI inflation—the picture was somewhat brighter. Prices rose by 0.5% in November, slightly less than the month prior, and climbed by 4.9% over the last 12 months. That’s well above the Federal Reserve’s 2% target, although the Fed prefers a different inflation gauge, PCE inflation.

Certain items contributed mightily to these historic gains, as any driver can attest. New vehicles jumped 1.1% over the past month, and are now 11.1% higher compared to 12 months prior. Grocery prices were 0.8% more expensive in November than in October, continuing an expensive trend. Over the past year, food is 6.1% higher. Shelter costs have risen by 3.8% during the same period, while energy is up 33.3%.

Inflation Isn’t Looking Transitory

One of the Fed’s key jobs is to keep price growth stable, and Fed officials have been telling anyone who’ll listen to expect higher inflation in the near term as the economy gets back to normal. They’re also saying that current inflation pressure should give way to more healthy price growth over the longer haul.

But those calls of “transitory” high inflation have been undermined by persistently high prices. In a recent press conference following the meeting of the Federal Open Market Committee (FOMC), Federal Reserve Chair Jerome Powell said that “transitory” was a tricky thing to define.

“So, transitory is a word that people have had different understandings of,” he said. “Really for us, what transitory has meant is that if something is transitory, it will not leave behind it permanently or very persistently higher inflation.”

Nevertheless, Fed officials have admitted that inflation has persisted longer for higher than expected, no matter your definition of “transitory.”

During recent Congressional testimony, Powell admitted it was time to retire usage of the term.

Workers are especially feeling the sting. Saying that higher prices will moderate once the economy gets back to normal is easier than actually living through the increase. Recent analysis by the Peterson Institute for International Economics (PIIE) showed that inflation-adjusted compensation is 2% below where it would have been had the Covid-19 pandemic not occurred.

Inflation Gains and the Covid-19 Recession

As high inflation first became an issue in the Spring of 2021, the Fed laid out a few reasons to explain what was going on, which included base effects, supply-chain issues and a tricky labor market.

Base effects are perhaps the most intuitive reason for high price growth. That is, prices dropped considerably throughout 2020 as state governments imposed lockdowns in an attempt to slow the spread of Covid, and so any year-over-year comparison was bound to look outlandish when people began spending more as life returned to normal

This was seen most clearly early on in airfare costs.

Once the Covid-19 pandemic began, demand for travel plummeted, which led to a drop in prices. In April 2020, for instance, airfares fell 24% year-over-year, and they would spend most of the rest of 2020 at these depressed levels.

But once a year passes, these year-over-year comparisons turn: The June CPI report, for instance, compared vaccine-era airline prices to what they were after Covid-19 struck. So it’s not terribly surprising that June 2021 airline prices were almost 25% higher than a year before, if only because so few people were buying tickets then.

This was one of the key points that the Fed had been pounding away at: with vaccines widely available, more people were bound to fly. Yes, airline prices are much higher than a year ago, but they remain cheaper than where they were pre-pandemic.

In fact, airfare prices came down after peaking in June and are now 5% cheaper than in October 2020.

Yet overall inflation is soaring, so something else must be going on, too.

Supply chain issues continue to mess with prices. Take used cars and trucks: While prices declined as the economy went into the recession, it is not the case that used cars and trucks became cheaper than they were in February 2020. In fact, they’ve never been more expensive.

The reasons for that hike are tied to the pandemic, to be sure. Supply is limited thanks to new car production being stymied by an ongoing chip shortage, people hanging onto their leases for longer and rental car companies—a major source of used cars—having fewer to unload after limiting their inventory when the pandemic struck. Plus people who put off buying cars last year are suddenly competing for automobiles today.

The Fed has warned the public over these and other supply-chain issues, saying it’ll take time for sectors of the economy to get back to normal. Once these kinks are worked out, the Fed asserts, inflation will stop growing so quickly. The problem is that these kinks will likely last for more than a year, rather than a few months.

Labor issues are another source of concern. Tens of millions of Americans lost their jobs (or left them voluntarily) during the Covid Recession, which resulted in a lot less stuff being produced. American bank accounts were buttressed with expanded unemployment insurance and direct stimulus, but those dollars were ultimately chasing fewer goods and services since fewer people were working.

Businesses, meanwhile, have had a difficult time throughout 2021 hiring enough workers to satisfy demand, and the labor-force participation rate is 1.7 percentage points lower than before the pandemic.

Should You Be Worried About High Inflation?

There was only supposed to be a transitory period of high inflation, according to the Fed. Supply chains and businesses just needed a little bit of time to work out the knots involved in reopening the global economy. While the specific definition of “transitory” wasn’t firmly established, it was talked about in terms of months; things would get back to normal by the end of the summer or perhaps into the winter.

Now we know that “transitory” is much longer than that. Moreover, high prices aren’t specific to cars or air travel. Food, shelter and energy prices have shot through the rough.

That’s one reason why the University of Michigan Consumer Sentiment gauge has dropped to the lows seen right after Covid-19 started spreading across the country.

The Fed recently announced that it will buy fewer bonds over time, which should take some of the rocket fuel out of the economy. But with the labor market not yet recovered from its pandemic losses, it will be a while before the Fed hikes interest rates, a typical maneuver used when inflation runs hot.

But it’s not clear that there’s a monetary policy solution to this inflationary moment.

“The Federal Reserve is starting to taper its stimulus and might be forced to hike interest rates sooner due to rising inflation, but rate hikes might not be enough to reverse inflation because the sources of inflation involve supply chain bottlenecks and fiscal spending, which are two areas that the Federal Reserve doesn’t control,” said Nancy Davis, founder of Quadratic Capital Management.

Consumers, then, will likely have to face higher prices for longer than anticipated, and investors will have to hope the Fed doesn’t raise interest rates more quickly than expected, thereby spooking markets.

Everyone is now left wondering just how transitory this transitory inflation spike is and how long average Americans will stomach it.