All that economic help that the Government is offering due to the pandemic is having a direct effect on the US inflation rate in 2021. Over the last seven months, inflation topped 5% and December even reached 7%. This is a major blow for the Biden Administration and the Federal Reserve. Prices of goods and services in the United States keep climbing at rates that haven’t been seen in the last 40 years. Until recently, both the Biden Administration and the Federal Reserve kept characterizing soaring prices as a “transitory” phenomenon that came out of the supply chain issues that were directly caused by the pandemic.
The container shortage suffered worldwide was a major reason these massive shortages in goods and services. On Wednesday, the labor department confirmed that the CPI (Consumer Price Index) rose 0.5% in December compared to a month prior and a total of 7% compared to December 2020. Pricing on housing and used cars were the biggest contributors to this increase in inflation rate with 0.4% and 3.5% increases in price conpared to November, respectively.
Is a new economic crisis coming?
Thinking about the 2008 economic crisis seems inevitable at this point, simply by looking at the numbers and the dire situation all around the country. Disruptions caused by the pandemic on the global supply chaing are still causing shortages and every single goods’ prices keep sky rocketing without stopping. Food prices also keep increasing but the 0.5% increase in proce is not as high as previous months. As a response, the Federal Reserve is getting ready to raise interest rates to curb inflation and it may happen three times throughout 2022. This inflation is no longer transitory, it’s here to stay for at least the rest of the year.