The Debt-Inflation Cycle

The U.S. federal debt has climbed nearly every year, and its growth tends to track inflation. Comparing the two year over year, debt rises fastest around inflation peaks. It's hard to say which drives the other, and the relationship may run both ways. Higher inflation raises borrowing costs, which makes the debt more expensive to finance. Growing debt, in turn, can add to inflationary pressure. Together, these effects can form a self-reinforcing cycle. 

Source: Federal Reserve Bank of St Louis, U.S. Department of the Treasury 

This graph was produced by Lucas Juery, CFA, CFPⓇ and is not intended to provide financial advice.