Inflation begins to dig in
While the Federal Reserve promises it will start taking inflation seriously, likely through a series of interest rate hikes over the year, prices are still going up. And that means a lot of people who’ve never lived in an era of high inflation are beginning to do a lot of things that were daily routine for their parents and grandparents:
The need to make lifestyle changes is in many ways a reflection of just how broad the gains in prices are. There are higher home heating prices, surging rent costs and rising food and gas prices.
Trading down in food or forgoing favorites that have risen in price is often one of the first places people look to save in inflationary times. When prices increased during the recession of 2008, consumers substituted higher-priced goods with cheaper options. Consumers sought sales, purchased larger sizes, used more coupons and opted for generic brands, said Aviv Nevo, now a professor at the University of Pennsylvania, and Arlene Wong, a Princeton University professor, in a 2019 research paper.
This time, however, inflation seems to be increasing quicker.
“Inflation has broadened out—it’s not just lumber and used cars anymore,” said Ted Rossman, senior industry analyst at Bankrate.
And that could have long term effects on economic growth, employment, and more. It also means we should be on the lookout for Joe Biden talking about “malaise.” Though if he does, can “Whip Inflation Now” buttons be far behind?