The US inflation is soaring high at a very fast pace compared to the last four decades. Costs of gas, food, and housing, among other necessities, are increasing without a stop in sight.
The reason behind the US inflation
On Tuesday, the US Labor Department stated that the consumer price index rose by 8.5 percent this March compared to last year. The rise is the biggest annual increase since December 1981. Additionally, the US inflation is due to the bottleneck supply chain, ever-increasing demand, and the worsening disruptions to the global food and energy supply. The Russian war against Ukraine is increasing the problems created by the COVID-19 pandemic.
Additionally, the agency reported a rise in inflation by 1.2 percent between February 2021 and March 2021. On the other hand, the increase was 0.8 percent between January and February of this year. The inflation numbers for March were the first to fully capture the surge in gas prices following the conflict. Moskow’s attack is triggering sanctions against Russia’s economy and is in turn disrupting the supply chains.
Factors adding up to the rising prices
The rising energy costs are leading to high costs of transportation. This is in turn contributing to a high price for the consumers. Before Russia invaded Ukraine, a steady rise in pay, robust spending, and chronic supply shortages were sending the US inflation to its highest in over 40 years. According to economists, the American economy is emerging from the problems caused by the pandemic. Additionally, consumers are gradually rising their spending limits to accommodate services. This is also a factor leading to inflation.
With the fast pace of the Federal Reserve’s rising interest rates, loans will be more expensive for businesses and consumers. This in turn will make buying a home more expensive. Several experts believe that since the Fed has waited for a long time to increase rates, they might act very aggressively and trigger a recession.