After a difficult couple of years, Americans are now feeling the pinch of higher prices. The cost of fuel, utility bills, weekly grocery shops, and so forth are skyrocketing, hurting consumer wallets just as they prepare to spend big for the holiday season.

On Nov. 10, 2021, the Bureau of Labor Statistics (BLS) revealed that consumer prices rose 0.9% in October 2021 and 6.2% compared to a year earlier. That reading marks the fastest annual jump since December 1990 and a substantial leap above the Federal Reserve's target 澳洲幸运5官方开奖结果体彩网:inflation rate of 2%.

What Is Causing Today's Inflation?

Most 澳洲幸运5官方开奖结果体彩网:economists blame rising prices on COVID-19. Once lockdown measures ended, people were eager to capitalize on their freedoms and spend some of the money they hadn't used while being locked up at home, creating pent-up demand at a time when 澳洲幸运5官方开奖结果体彩网:supply chain bottlenecks were rampant.

The pandemic halted the production of all sorts of goods and services substantially, and companies are now either trying to recoup lost income or struggling to get normal services up and running again. The virus generally had the opposite effect on demand. Government 澳洲幸运5官方开奖结果体彩网:stimulus packages, a lack of spending due to being forced to stay at home, and a desire to enjoy life again after what has been a stressful few years triggered a desire to consume, travel, and buy. In short, it is this concoction of 澳洲幸运5官方开奖结果体彩网:low supply and high demand that is prompting prices to shoot up.

Which Prices Are Rising Highest?

COVID-19 affected pretty muchꦐ all industries, influencing the price we pay for everything from a gallon of gas to a loaf of꧋ bread to a pack of bacon.

Each time the BLS publishes its monthly inflation figures, it accompanies its report with a breakdown of price changes by category. In October, the highest annual price rises were reported for fuel, auto rentals, gas utilities, and used cars and trucks.

Will Inflation Ease in 2022 and 2023?

The hottest debate right now, at least in economics, is whether this pace of price increases will continue. Many economists are confident that current inflationary pressures are temporary and won't last too much longer. Others are less positive, arguing that Americans—and people in most of the world's other largest economies—need to adapt and be prepared for more hardship.

In 2022 the monthly rate of inflation continued upward to a rate of 9% in June 2022, then started to trend downward as the Federal Reserve (also known as the Fed or FRB) continued raising interest rates. Through October 2022 the rate year on year was 7.4%. As the FRB continues to increase rates the rate of inflation may continue to fall in 2023.

Prediction One: Yes

One popular theory making the rounds is that current price increases are unusually concentrated and should be ironed out as soon as supply chain bottlenecks and the post-lockdown urges to buy these things subside. In the past, when high inflation numbers were skewed by a handful of goods and services, it didn't take too long for prices to settle back down to normal.

There are also reasons to believe that today's pent-up demand will waver. Savings stockpiles accumulated byไ households during the pandemic should eventually be exhausted, and 🍒government support programs that handed out checks have now mostly expired.

Citi is one of many major investment banks to express confidence that today's inflation is temporary. Earlier in November, in a research note titled "The Changing Inflation Narrative," the bank's strategists predicted that inflation will ease after February 2022 as supply catches up to demand and the Fed makes decent progress delivering on its plan to 澳洲幸运5官方开奖结果体彩网:reduce bond purchases.

Prediction Two: No

Unfortunately, there are also valid reasons to believe that today's strong inflation won't go away anytime soon. The argument that price increases are limited to pandemic-disrupted industries is beginning to waver a bit as other isolated, slower-moving categories such as rent join the trend of becoming more expensive.

The state of the 𝕴labor market is another concern. Growi꧂ng job vacancies and difficulty filling positions could likely lead to higher wages. Bigger salaries may trigger more spending among recipients and tempt businesses to recoup these costs by driving up prices.

These observations, coupled with the possibility that the 澳洲幸运5官方开奖结果体彩网:supply chain bottlenecks caused by COVID-19 will take longer than anticipated to sort out, mean we could find ourselves much worse off this time next year.

The Fed's View

Amid all this panic, the people responsible for keeping price growth stable have remained relatively calm. The official word from the Fed has been that this bout of higher inflation is normal and just part and parcel of the economy getting back to normal after a fairly significant, unprecedented downturn.

It shouldn't come as a big surprise that 澳洲幸运5官方开奖结果体彩网:central bankers are issuing tranquil statements. Their job is to transmꦡit calmnes📖s, keep markets panic-free, and intervene and change tact only when it is strictly necessary.

So far, the only notable move has been to reduce purchases of Treasuries and 澳洲幸运5官方开奖结果体彩网:mortgage-backed securities (MBS), which have played an important role in keeping 澳洲幸运5官方开奖结果体彩网:interest rates at record low levels. If that play is not sufficient to take the heat out of the economy, the Fed does have other tools at its disposal to raise borrowing costs and discourage spending.

Inflation Winners and Losers

A bit of inflation is necessary to keep the economy growing and is generally considered healthy, provided it is kept under control. If prices continue to spike excessively, it will become a problem and need to be handled accordingly. Rapid inflation can turn really nasty and usually culminates in companies and households reining in spending and slipping into an eventual 澳洲幸运5官方开奖结果体彩网:recession.

Here is a basic summary of some of the biggest winners and losers when it comes to inflation: