The cost of living surged 5% last month, according to the Department of Labor. That’s the highest inflation rate we’ve seen in more than a decade.
Bloomberg economics reporter Reade Pickert says inflation is measured according to the consumer price index (CPI), which is like a weighted basket of American spending. That includes the price of housing, such as rent or hotel rates. She says that in May and June, the CPI jumped to the highest point since 2009.
“The real question and the source of a ton of debate among economists … is whether these price gains that we've seen will eventually kind of settle out, or whether it will ultimately lead to something more concerning,” Pickert tells KCRW.
Used cars, furniture, and even bacon have gotten more expensive. Pickert says the increase can be traced to global supply chain issues that have been present throughout the pandemic. Now due to the broader reopening of the economy, there’s more demand for goods and services.
“Folks have extra savings that they've had over the last year. They might have been using their stimulus checks towards goods and things like used cars. And so you really see these shifts in demand that have put pressure on these prices. And so the demand is outstripping the capacity that we have and the supply that we have.”
Pickert says that the shortage of workers could play a role in higher inflation, as companies are paying more for products and offering prospective workers higher wages.
“From a company perspective, in order to preserve their profit margins, they're going to have to pass some of those higher costs on to consumers. And for you and me, that comes in the form of higher prices.”
Pickert says it's still unclear whether rising inflation is permanent. She’s talked to economists who say it’s temporary once more goods are distributed through the economy.
“The Federal Reserve very much expects these pressures to be temporary. They use the word transitory. … They associate the fact that a lot of these price pressures are coming from things like reopening from the supply chain challenges and bottlenecks,” Pickert says. “Other economists are worried that you might see inflation really starting to pick up and grab hold and increase in future months as well.”