Inflation in the United States rose 8.5% in March compared to the last 12 months, the highest since 1981. Ministry of Labor Consumer Price Index..
Inflation rose 1.2% between February and March, The biggest monthly jump since 2005..
According to some economists and other financial experts, high consumer demand in the economy (meeting low supply) is the main factor driving inflation. They said the war in Ukraine has also pushed up prices of oil and food in particular.
Also, government intervention is limited, according to experts who spoke with ABC News.
Experts also told ABC News that inflation is likely to be a problem in the coming months.
Factors that promote inflation
Consumers traditionally spend most of their money on services, but during the pandemic demand has shifted to commodities. Mind money media I told ABC News.
“You saw the breakdown, you saw the manufacturer unable to keep up with its demand, you saw the challenges the manufacturer had for COVID, and you were in the supply chain. I saw a mess, and it’s one of the things that underpins all of this, “Tissdale said.
According to experts, strong consumer demand is not met by sufficient supply and is a major factor in inflation.
“The biggest drivers of inflation are that consumers have a lot of money in their bank accounts, low interest rates to borrow at higher stock prices, and a lot they’ve saved because they didn’t spend much in 2020. “It was a very strong demand because of the money,” said Jason Ferman, a former chief economic adviser to President Barracobama, a working professor at Harvard, chief economist and member of the Cabinet.
“Recently, it has deteriorated due to soaring oil prices. [Russian President Vladimir] Putin’s invasion of Ukraine. “
Some experts believe that the stimulus has exacerbated the increase in demand.
David Wessel, director of the Hutchins Fiscal and Monetary Policy Center at Brookings, said:
“And, benefiting from wisdom, we probably put too much money in people’s pockets-they want to spend it, but the supply side of the economy is both from and from a fiscal stimulus. The fact that people who are unable to keep up with the rapid increase in demand coming from are beginning to relax about the pandemic. “
Ferman said inflation in the United States is worse than in other developed economies. This is partly due to the exciting funding from the government.
“The United States has a higher inflation rate than any other major industrialized country, probably because of the larger fiscal response. No other country has sent a check of the scale we did,” Ferman said. rice field.
Other experts agree that stimulating payments contributed to inflation, but that mass-distributed payments were not the cause.The government distributed 3 rounds Checks for Americans During a pandemic as a financial bailout, hoping to boost the economy.
“Sure, we can argue that the stimulus has definitely contributed to inflation, but there wasn’t a big stimulus in Europe. They’re still seeing 7.5% inflation,” said a senior economist. Dean Baker said. The co-founder of the Center for Economic Policy Research told ABC News.
Russia’s invasion of Ukraine has pushed gas prices “from the roof”, raising concerns about crop harvesting from Ukraine, the world’s major wheat exporter, according to Baker.
“There are real concerns that many of them will not be planted or exported, and the prices of wheat and many other agricultural products have risen significantly in the last two months, post-war or so,” he said.
What the government can do
Experts said there wasn’t much that the government could do to combat inflation, as rising consumer demand is a major factor in inflation, but agreed that the Federal Reserve should raise interest rates. There is.
“The main thing is for the Fed to raise interest rates and start selling assets, the purpose of which is to borrow money to buy a house, to buy a car, or for a company to buy a plant. It’s going to be more expensive, and it will cool economic demand, slow economic growth, and slow inflation. “
“It’s incredibly uncertain which of them will do how much,” he added.
Baker agreed, saying, “Given the strength of the labor market, it doesn’t make sense to have zero interest.”
Baker promises that the government will somehow help the oil market to help lower oil prices, and oil companies burned by the 2014 oil price plunge will boost production faster. He said that he could encourage that.
“It’s fresh enough in people’s minds and they hesitate to work on drilling first, so one way to counter it is the Biden administration … they support the market. May make a promise, “Baker said.
According to Baker, if oil prices fall below a certain amount, the government may be committed to buying barrels to replenish strategic stockpiles and thus supporting oil prices.
Wessel suggested that the Biden administration could also be abolished. Tariffs in the Trump era, May lower the price of imported goods. Raise taxes; or cut spending to drive demand out of the economy.
Inflation can be a problem in the coming months, but experts are divided on how long it will last.
“I saw some signs [Consumer Price Index] It suggests that we may have survived the deterioration, but we expect inflation to be high for at least another 18 to 24 months. “
Inflation can last for years, Ferman said.
“Some of the inflation is probably temporary. I don’t think the true underlying inflation rate of the economy is 8%, but probably not 2%. So inflation should start to fall a bit. But it’s unlikely to come near where the Federal Reserve wants. “
“For years to come, it could easily stay high. We are fortunate and magically everything can disappear. [Or] It can lead to a recession and it can disappear. But I think the most likely scenario is that it will last for years, “Ferman said.
“People need to plan higher interest rates, so mortgages, car loans, etc. need to plan higher. They need to plan to keep prices high, but. It needs to be understood that it is still a very strong labor market, where there are many work options. “