Inflation continues to climb squeezing American households yet there seem to be few solutions from the Federal Reserve and the White House.
He reiterated similar comments this week after policymakers hiked interest rates by 25 basis points for the first time since 2018. While the initial cause of the skyrocketed inflation rate can be traced back to when pandemic-era supply chain issues frustrated the normal market pattern, American consumers are still struggling to afford the rising cost of goods as businesses face sharply higher costs for labor and materials.
Second, we may instinctively tend toward complacency regarding inflation, given the lack thereof following the 2008-2009 Global Financial Crisis . Then, as now, fiscal and monetary stimulus were liberally deployed to dig the country out of a recession, and commonly feared inflation did not materialize in the GFC’s aftermath.
Today, skyrocketing financial and real assets, driven by abnormally low rates and trillions in pandemic stimulus, have left households flush and eager to spend. Likewise, credit is free-flowing and more capable of fueling demand. Finally, two key production inputs that were cheap post-GFC, oil and labor, are expensive now.
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