Written by Ryan Hitchcock (Financial Advisor, High Point Capital Group, Milwaukee, WI)
If you stayed up with my blog last year, the word "inflation" was pervasive throughout...even as hard as I tried to not let it be. This year, I can't escape it again just like we can't escape it in real-life. Inflation has been the worst we have seen in 40 years and has been a wake-up call to everyone.
Today let's try to understand it some more. Only then can we then prepare better in our daily lives.
My quick take:
What Is Inflation?
Inflation is often described as “too many dollars chasing too few goods;” in other words, as spending outpaces the production of goods and services, the supply of dollars in an economy exceeds the amount needed for financial transactions. The result is that the purchasing power of a dollar declines.
How Is Inflation Measured?
When economists and central banks try to discern the rate of inflation, they generally focus on two types of readings.
-Core inflation or Core CPI excludes food and energy prices, which are subject to sharp, short-term price swings, and could give a misleading picture of long-term inflation trends.
-Headline inflation is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
How Can Inflation Be Controlled
Central banks, such as the U.S. Federal Reserve, or the European Central Bank (ECB) attempt to control inflation by regulating the pace of economic activity. They usually try to affect economic activity by raising and lowering short-term interest rates. This is called Monetary Policy
Where To Go For Inflation-Related Research
U.S. Bureau of Labor Statistics - BLS.gov
My quick take:
This site is very user-friendly with a lot of useful information for the everyday person. I think can be a good place to drill down on where inflation really might be hitting you personally. Inflation is hitting us all right now, yes, but it may be hitting some people more than others depending on their lifestyle. For example, maybe you rely on transportation services or medical needs more than rents or utilities.
Inflation CPI reports are released monthly around the 10th or 15th of the month. Here is March's release for February data. What's been interesting to see is that the midwest has unfortunately had some of the hardest hits of inflation increases compared to other parts of the U.S.
Some inflationary items I know I have been feeling:
Electricity - +9% (unadjusted 12-mo ending Feb. 2022)
Piped Gas - +23.8%
Food at Home - +8.6%
Food Away From Home - +6.8%
Gas - +38%
Fuel Oil - +43.6%
If you have any questions about how to plan for inflation in your personal situation, please don't hesitate to reach out!