How high inflation became a 'fact of life' in the U.S.

U.S. consumers are in the midst of one of the longest stretches of elevated inflation of the past century. Some are beginning to act like it's a new normal, raising alarm bells for members of the Federal Reserve.

Wednesday's consumer price index release showed a 3.7% increase year over year in September. CPI has now registered around 65 months — that's more than five years — of consecutive annual readings above 2%, a widely accepted target for inflation in the U.S.

This yearslong spell of high inflation has cast a dark cloud over everyday Americans' view of the economy, and could shape everything from how they budget to how they vote in next month's midterm elections. At the Fed, leaders are left questioning whether consumers' inflationary expectations are becoming too entrenched to rein in.

"They're starting to accept high inflation as just a fact of life," Cleveland Fed President Beth Hammack wrote in a social media post last week. "That's concerning."

The current streak of stubborn inflation ranks among the most persistent in modern U.S. history.

The uninterrupted string of above-2% monthly CPI readings is the longest of the 21st century, according to a CNBC analysis of data from the Bureau of Labor Statistics. The U.S. has seen longer periods on only two other occasions going back to the late 1940s.

Since inflation started running above 2% in early 2021, the average CPI reading has sat around 4.5%. The last time a streak had a mean reading that high was during a period ending in the 1980s.

Consumers are expecting inflation to accelerate. The one-year inflation outlook in September rose three-tenths of a percentage point to 3.9%, its highest reading in more than three years, according to the New York Fed's Survey of Consumer Expectations released last week.

One of the main worries of central bankers is that businesses and consumers may start permanently adjusting their behaviors to account for high prices. That can have ripple effects through the economy.

Businesses anticipating rising costs can preemptively hike prices for consumers. Workers expecting sticky inflation will ask for steeper pay raises to get ahead of any sticker shock.

All of this can make inflation a self-fulfilling prophecy, rendering the monetary policy tools at the Fed's disposal less effective in slowing price growth.

"Inflation expectations have to be anchored for monetary policy to affect the economy in an effective and predictable manner," said Gary Richardson, an economist and former historian at the Fed. "That's got to be number-one goal of any central bank."