What is inflation and how is it managed? 

Inflation is the overall increase in prices for goods and services during a given period  which can be controlled or exacerbated by government administration policies. Additionally, the Federal Reserve Bank (FED) aims to keep the inflation rate at 2% annually, their tools are adjusting interest rates and quantitative easing (QE), which quite simply is the printing of money. For a more in depth analysis of QE, please see this article from Forbes

The Consumer Price Index (CPI) is a weighted average of prices, food and energy are two of the items that have increased in price the most for every American. The CPI is used to measure inflation in a given economy over a specific timeframe. It could be measured month to month, year to year, or over a longer period. For more information on the details of the calculations please refer to this USA Facts article:  What is inflation and how is it measured? – USAFacts

According to InflationData.com inflation stands at 9.06% as of June 2022. Based on the information about CPI, we now understand that this inflation number is based on a broad range of consumer goods. But, when we buy groceries, gas, clothing, etc., is our real inflation rate only 9 % as we are being told?

As the Patch reported recently from local CPI numbers, “Philadelphia-area residents saw a 1.8 percent increase overall in the price of food over the month of June. Over the year, food prices were up 10.1 percent, which is the largest increase since Feb. 1981. Energy prices in the Philadelphia area were up by 46 percent. Utility (piped) gas service prices were up 44.3 percent, the largest increase since August 2001. Electricity prices were up 19.1 percent, the largest increase since September 1984. Rent went up 5.1 percent over the year, and the cost of transportation was up 17.4 percent, driven by a 59.3 increase in gasoline prices. The cost of commodities went up 13 percent since June 2021.”

The current administration told the country that the “Build Back Better” policy “won’t increase inflation” but will “enhance our productivity – raising wages without raising prices.”  Just two years ago in June  2020 the inflation rate was 0.65%. Now, we have the highest inflation rate in 40 years!

If the FED aims to keep inflation around 2% and they successfully did that for several years under different administrations, then we must question what is causing the current inflationary environment.

Experts warn that inflation could be around for years, despite claims from the FED and Biden administration that it is likely to wane in the next year.

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