Best Business Story: Inflation


Inflation has been the biggest lock on this price since Forrest Gump won the Oscar for Best Picture. No other business story stood a chance.

Why? Inflation, which is the rate of price increase over time, affects us all on a personal level. We pay the electric bills, go shopping, decorate our homes, buy cars, and this year all of those things have gotten more expensive.

Like, much more expensive. Thanks to a nefarious mix of growing demand for goods and booming supply chains, consumer prices in the United States rose the most in 39 years in November, and the inflation rate of 6.8% marked for the sixth month in a row, inflation rose 5% or more. Producer prices, which can eventually trickle down to individuals, also rose at their fastest pace on record in the past month.

Of course, some inflation is good for the economy when wages keep pace with rising prices (the Fed targets an inflation rate of 2% over time). But, so far in the pandemic, that has not happened. While many Americans got a raise in 2021, wage gains have not been enough to offset inflation, leading to erosion of purchasing power, especially for those on more or less fixed incomes. .

Where do we go from here?

After months of pretending inflation was “transient,” the Fed ditched that term and adopted a more hawkish monetary policy to curb the spike in prices. The central bank ends its stimulus program to buy bonds faster than initially planned; the Fed also plans to hike interest rates three times in 2022.

In its efforts to fight inflation, the Fed is not alone on the front lines. The Bank of England became the first major central bank to raise interest rates during the pandemic to tackle the largest annual consumer price hike in 10 years. Russia has increased its rates seven times this year. Mexico, Chile, Costa Rica, Pakistan and Hungary are among the other countries tightening monetary policies to fight rising prices.

Look forward …as if economic policymakers need another ball of the inflation curve, Omicron has taken the mound. Central banks generally don’t expect the new variant to significantly hurt economic growth, but they believe it could prolong inflation by exacerbating the supply-demand imbalance that fueled the price hike in the first place. .

—-

Finalist: Covid vaccines. The pandemic and the vaccine rollout grabbed the headlines this year. As the coronavirus continued to trigger serious illness and all manner of suffering, there was also immense progress. Consider: As of January 1, 7.4 million people worldwide had received at least one dose of a Covid vaccine. Fast forward to earlier this month, and more than 4.4 billion people received at least one dose, more than half of the world’s population. Hoping that Covid habit be one of the main news in 2022.

Runner-up: Meme actions. Crazy runs from GameStop, AMC, and other heavily shorted stocks favored by retail traders have highlighted just how powerful social media has become in the stock market. But after thoroughly investigating all of the chaos of the past winter, the SEC found that the markets were working pretty much as they were supposed to during the episode, and it doesn’t look like any significant policy change is happening. at the store.

About Matthew Berkey

Check Also

“We are tired and desperate”: Stories of families who survived the Darién Gap – Panama

In 2022, most migrants crossing the Darien Gap are Venezuelans – a change from 2021, …