May 12, 2021
We have pent-up demand in the economy. It may take some time for supply to rise up to demand.Vice Chairman of Federal Reserve, Richard Clarida, on data showing the biggest increase in inflation in more than a decade.
- An important monthly data point (The Consumer Price Index or CPI) measures inflation for a basket of items American encounter regularly, like housing and energy costs, to measure inflation. The CPI showed a large jump in inflation year-over-year in April, which means prices for these good have gone up, while our purchasing power has gone down.
- Good explainer: “Inflation leads to higher prices and lower purchasing power. It’s usually a monetary phenomena caused by a country printing more money than is justified by the country’s wealth.”
- Economists say one reason for the large annual gain was due to the extremely low inflation at this time in 2020 as the U.S. economy mostly shut down in the early days of the pandemic. However, others worry that the additional stimulus in the economy, also due to the pandemic, may push inflation higher in the future.
Why It Matters: Higher inflation means a dollar buys you less.
by Jenna Lee,