What You Should Know
Today’s economy is marked by record levels of inflation. Americans face higher prices across a variety of necessities and other goods and services. This presents a serious setback for the economy as the purchasing power of American households is diminished. The inflation rate, as measured by the Consumer Price Index (CPI), hit a 30-year record high in October 2021 at 6.2 percent.
Prices for particular goods have increased even more: Gas prices are up 49.6 percent from one year ago. Common grocery items are also up, such as beef (20.1 percent), bacon (20.2 percent), and eggs (11.6 percent). Families are spending 28.1 percent more to heat their homes and 25 percent more on hotel stays.
Frustrated by pain at the pump — and at every other point of consumption — Americans are looking for answers: What causes inflation? Why are we facing high prices today? What can be done to slow inflation? The Covid-19 pandemic created new economic challenges as Americans were forced to stay at home and reduce economic (and social) activity during the initial response to the novel coronavirus. What does that have to do with inflation?
The answers to these questions are of great consequence. Inflation hurts everyone, but those with the lowest incomes suffer the most. These households already commit a greater share of their spending to necessary purchases such as food, energy, and transportation, and they have less room to shift their budgets around. Policymakers should focus their efforts on slowing inflation and relieving this burden.