The pandemic and inflation: What consumers need to know

EU inflation is up, reaching record levels. It is clear that the coronavirus pandemic has harmed individuals, families, and small businesses everywhere. Even though it is good news that many people are getting vaccinated, it is also true that many of the economic hardships of the past 12 months are going to be with us for a while. For example, there is rising concern that inflation is getting out of control. A recent article indicated that the inflation rate of many consumer goods has been approaching eight percent. As a result, everyone needs to understand what inflation is, where it is coming from, and what this might mean for the future. What do consumers need to know?

What does inflation mean?

First, it is essential to look at what we mean when we are talking about inflation. Inflation refers to the cost of specific goods and services. If inflation is going up, people need to spend more money to purchase the same product. For example, the price of a gallon of milk has gone up during the past few months. On the other hand, if wages are not going up by the same amount, this will place a lot of strain on individuals and families. Therefore, everyone must keep up with inflation to know how much they have to pay for certain goods and services. This can place a lot of families in positions of financial hardship.

Why is inflation happening now?

Next, it is critical to take a look at why inflation is happening right now. Because of the coronavirus pandemic, the Federal Reserve had to take specific steps to ease the financial stress of the current situation. Therefore, they started printing more money, which contributed to inflation. Because there is more money in circulation, more people were able to buy goods and services. This increases the demand for specific items, which leads to price hikes. This is where inflation comes from. 

Furthermore, the government implemented a massive stimulus program, which immediately injected trillions of dollars into the economy. This is another measure that contributed to the growth of inflation. All of these measures were triggered by the coronavirus pandemic, which has led to high levels of inflation recently.

What does this mean for individuals and families?

Now, many people are wondering what this means for individuals and families. In the short term, this means that the cost of goods and services is going up. Some families that were already struggling during the pandemic will have to pay more for certain staples. Many consumer goods, including gas, milk, eggs, and bread, have gotten more costly. While it is nice that many struggling people have gotten extra checks from the government, this might not mean much if they have to spend more money to buy the things they need. This is going to disproportionately impact people who have been out of work for a while as well. While it is unlikely that these inflation rates will continue, it is a significant problem right now.

What will the government do?

Many people are wondering what the government is going to do. The government does not operate in a vacuum, and they pay attention to the global economy. With many people saying that the euro will keep rising compared to the dollar, the government may taper interest rates to keep inflation under control. This is important not only for the national economy but for the global economy as well. While the Fed may not raise interest rates this year, they may do so in the early part of 2022.

Understanding the impact of inflation

Ultimately, inflation is present all the time; however, because of the recent coronavirus pandemic and the government’s response, inflation is happening faster right now than it did in the past. It is difficult to predict what will happen in the future, but individuals and families need to understand what inflation might mean for them. Anyone who has questions or concerns about what inflation could do in the future should reach out to an economic professional. That way, they can make sure that they prepare themselves accordingly.