MURFREESBORO, Tenn. (WTVF) — You probably noticed the last time you filled up your gas tank or grocery cart, that items are getting a lot more expensive. Economists blame it on inflation, but why is it happening now?
MTSU Economics Professor Charles Baum says, for the last several decades, inflation has been so low, most of us haven't noticed. Not anymore. "Food prices, energy prices, prices for cars," explained Baum.
He says there are a couple of reasons why. First, between stimulus plans and spending bills, the federal government has injected trillions of dollars into the economy, meaning a lot of Americans are ready to spend. "Firms and employers and wholesale and retail stores see they can charge higher prices and still sell their products, and so we see prices going up," said Baum.
But supply can't keep up with demand. "There are a number of goods and services that have been unable to be produced due to some sort of interruption," he said.
Supply chain issues we're experiencing now started during the worst of the pandemic, when some industries paused production. That's only gotten worse now, as businesses struggle with a labor shortage. Baum says a couple of things are happening all at once; some are choosing to opt-out of the workforce while Baby Boomers are hitting retirement age. "And they’re not coming back to the labor force. They're staying retired," said Baum.
All of those factors combined have caused prices to surge. The big question is — will inflation stay this high? "The latest forecast suggests these rates of inflation will remain elevated into the better part of the 2022 calendar year," he said.
No matter how long it lasts, there's no doubt, you'll notice. "For the majority of the population, people on fixed incomes, inflation is harmful because it’s eroding their purchasing power, their standard of living goes down," said Baum.
Some economists believe we're on track to hit 6% inflation this year. That would be the highest rate we've hit since 1990.