By Josh Daniels
With gas prices skyrocketing and housing costs through the roof, the various stimulus programs throughout the pandemic, record spending by the government, and disrupted supply chains raising costs of goods, it is unsurprising that the annual U.S. inflation rate jumped to 6.2% in October – the highest rate since 1990. Should Americans be worried? Is there anything that can be done to halt the inflation?
First of all, inflation increases during economic recoveries, and as the US is coming out of a recession caused by the COVID-19 pandemic, it is safe to say that high inflation is expected and even a good sign for the economy. However, the rates were expected to decrease back to pre-pandemic levels in 2021, but instead soared to record levels in October.
Americans have been anxious about the numbers, but the Federal Reserve has stood strong that although the rates are higher than expected, they are not worried and believe the numbers will cool down in 2022. However, Jerome Powell, the Chair of the Federal Reserve, has stated that if needed, the Fed will raise interest rates next year in order to combat inflation if it continues to rise.
The Fed raises interest rates through selling bonds from banks and taking money out of the hands of the public. When banks have less money, they raise interest rates, making people or businesses less likely to take out loans, and ultimately decreasing the amount of money circulating in the economy.
Jerome Powell, nominated for a second term by Biden just weeks ago, pledged that he would keep interest rates low, but might have to break his promises if inflation continues to rise.
