Inflation in the U.S.

Inflation, which is measured by the Consumer Price Index (CPI), has been on the rise in the U.S.  In fact the U.S. CPI jumped to 6.8% in 2021 from a 1.4% in 2020.  The increase in prices is most likely caused by factors such as increasing production costs, increase in product demand, and fluctuating house prices resulting in weakened currency.  

Inflation rates are greater than ever with prices of goods and services in 2021 being more than 15 times higher than 1921 prices.  In just one year healthcare prices have risen 6%, food prices have increased by 8.3%, and used cars were sold at 29.7%.  We are essentially paying more for the same amount.  

With the U.S. encountering more than 19 recessions in just 100 years, the country has produced three ways to manage inflation: having less money in circulation, lowering bond prices, and using the central bank to raise interest rates.  However, these actions can still come with costs, such as creating recessions, reducing spending power, and causing people to lose their jobs.  There are other positives and negatives people can expect from inflation as well.  In 2021, unemployment actually dropped to 4.2% as average hourly wages rose about 5%.  On the other hand, U.S. hourly earnings have decreased by 1.1% while interest rates are expected to rise to 3% by 2024.  Nonetheless, you can protect yourself from the negative effects of inflation by being proactive. Investing in stocks, raising retirement contributions, and buying property can be some of your options.

Inflation is something that a country can’t easily avoid, but you as an individual can take action to protect your own finances.

Source: Expensivity

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