U.S. Inflation Skyrockets to 40-Year High: Report

by Clayton Edwards
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Americans have been dealing with high inflation for quite some time now. Recent reports show that it is only getting worse. In fact, the Fed recently reported a higher-than-expected jump in the consumer price index for February. Inflation rates haven’t been this high since the eighties. This means that consumers will not only continue to shoulder high prices on everyday goods but also experience even higher costs for necessities. However, the Fed has a plan to fight inflation but even that plan is a double-edged sword.

At a Glance:

  • Americans saw a 7.5% inflation spike in January, outpacing expert projections.
  • Inflation is at a four-decade high.
  • The Fed plans to raise interest rates to fight inflation.

Americans Seeing Sky-High Inflation

According to the New York Post, the Fed reported a 7.5% jump in inflation in January which will see Americans paying even higher prices across the board. Economists and other experts knew that inflation would rise again in January. However, they predicted a 7.2% hike. The actual numbers represent the kind of inflation that the U.S. hasn’t seen since February of 1982. At the same time, it shows that things are moving in the wrong direction more quickly than experts predicted.

The Labor Department’s Consumer Price Index helps to track inflation for the American people. In order to get the CPI, the Labor Department monitors the cost of things like food, gas, rent, and other goods and services. In a release cited by The New York Post, the Bureau of Labor Statistics said that higher prices for food, shelter, and electricity helped to drive the overall increase as high as it is.

However, those are not the only causes. The core Consumer Price Index excludes things like food and gas prices. It rose 0.6% in January and 6% since February of 2021.

White House Attempted Damage Control Ahead of Report

Before the American people learned about the latest jump in inflation, the White House tried to get ahead of it with positive messaging. White House press secretary Jen Psaki said that the Biden Administration expected to see “a high year-over-year inflation rate reading.” She added that a 7% increase wouldn’t be a surprise. However, she said, “It’s not about the most recent trends, which I think is the important component for people to look at.”

This comes as Biden touts recent job growth as a sign of a healthy economy and Republican lawmakers blame his spending to help the American people during the pandemic for the current level of inflation.

Fed to Hike Interest Rates, Fight Inflation

In 2020, the Federal Reserve System or the Fed, the central bank of the United States, dropped interest rates to zero. This made it much easier for Americans to take out loans and mortgages. Next month, the Fed will institute the first of several interest rate hikes planned for 2022.

They hope that these hikes will help battle inflation. However, they won’t be an immediate fix for our financial woes. Supply chain issues, worker shortages, and other logistical issues are also adding to inflation and dragging down the American economy.

At the same time, these rate hikes will raise interest on mortgages, student debt, business loans, and personal loans. So, to fight inflation, the American people will have to spend more on interest on their debt. There is, however, a silver lining. Now, money in savings accounts, CDs, and other accounts will begin earning money through interest again. It will be a slow build, but with the dual threat of inflation and interest rate hikes, every penny counts for many Americans.

Outsider.com