Why is Inflation so high? What are the effects?

Why is Inflation so high? What are the effects?

Written by Megan Murphy 

Recently, Inflation has reached its highest peak since 1981. I’m sure you have personally experienced these rising prices with either your gas prices or food prices. As of April 2022, the inflation rate is 8.3% which is almost 7% more than the inflation rate in 2020. Not only that but core inflation rose 5.5% in the fast year which is the quickest jump since 1991. Core inflation is inflation which excludes food prices and energy prices. Gus Faucher, a chief economist at PNG financial, stated, ““Prices are increasing broadly throughout the economy, and the Federal Reserve has been caught off-guard by the extent of inflation,″ which shows why inflation is getting so out of control. 

Some examples of inflation would be how bacon prices rose 19% from a year ago, men’s coats and suits rose 11% from a year ago, and dining room furniture is over 17% from last year. Also renting a car will cost you 36% more than it did a year ago. 

You may be wondering why inflation has been so bad recently. This is for a couple big reasons. The first reason is that consumers are on a spending spree now that most people are fully vaccinated and are out shopping more. Also, there have been stimulus checks due to the effects of covid which does go to stimulate the economy but the higher demand leads to higher prices. Not only is the demand for a lot of goods higher, there have been significant supply chain issues, some of which are tied to Covid-19. When there are supply chain issues, the cost of production tends to increase which then leads to higher prices. 

In times like these the Fed steps up to limit inflation. The Fed increased interest rates in order to limit inflation. However, it takes time for these tools to actually work. 

This table shows how high inflation is compared to all the years since 2012 

Works Cited 

ABC News, ABC News Network, https://abcnews.go.com/Business/government-stop-slow-inflation/story?id=84031525. 

“Current US Inflation Rates: 2000-2022: US Inflation Calculator.” US Inflation Calculator |, 11 May 2022, https://www.usinflationcalculator.com/inflation/current-inflation-rates/.

Wiseman, Paul. “Explainer: Why Us Inflation Is so High, and When It May Ease.” AP NEWS, Associated Press, 12 Jan. 2022, https://apnews.com/article/why-is-inflation-so-high-5f69bed77f98221f9936ae99f96fd361.