If you’ve been worried about inflation and want to know what’s causing it, this article is for you. There is important information about inflation you should know about. So keep reading below to learn what’s in store for you as a consumer.
Overview
Simply put, inflation is when a currency’s buying power weakens over a period of time. During inflation, a dollar will get you less tomorrow than it does today.
As an economic factor, inflation isn’t always bad necessarily. Sometimes inflation is good for an economy because it encourages spending when controlled properly.
Federal Reserve
With prices continuing to rise across the board, President Biden and the Federal Reserve have acted to ease the effects on consumers. The Federal Reserve has announced a 0.5% increase in the federal funds rate, which is the largest increase in 20 years.
Causes of Inflation
Inflation is typically caused by increased demand, largely due to an increase in consumers leaving their homes and spending money post-Covid, and supply chain factors like increases in production costs.
Usually there’s a 2% inflation rate ech year, but it’s when this percentage goes higher than this in a short period of time that inflation becomes a concern.
It’s also important to know that inflation isn’t an objective fact that’s plain to see. Researchers and experts who rely on market indexes and other research are the ones who form a consensus on when inflation is occurring.
Consumer Price Index
The Federal Bureau of Labor Statistics operates the Consumer Price Index (CPI). The CPI tracks data on over 80,000 products, such as food, education, medical care, fuel, and energy. This data is the best source of information to fully account for inflation.
Producer Price Index
The Federal Bureau of Labor Statistics also runs the Producer Price Index (PPI), which observes inflation from the point of view of producers and manufacturers. The PPI tracks changes in seller prices reported through several different industries such as construction, natural gas, electricity, and manufacturing.
Future of Inflation
The good news about inflation is that it’s unclear if it will continue. There’s no solid conclusion among economists and experts that this current inflation will remain at the same rate.
The Federal Reserve has been successful in keeping inflation at or below it’s 2% goal for almost 10 years. But it’s also possible that with the pace of inflation in 2022 that the situation is worse than predicted. So it’s definitely a fluid situation right now.
Stay Informed
USA Facts is a good source of unbiased information for consumers. If you’re concerned about inflation and want to now what’s in store next, then you’ll always want to read more on it. So far, it’s still too early to tell how inflation will play out for the rest of 2022. But it never hurts to learn about what causes inflation.
