(RepublicanReport.org) – The Fed has been buying over $120 billion worth of bonds each month lately, which has the effect of pumping money into the economy. This offers much-needed stimulation to a nation in the early stages of recovery from the COVID-19 pandemic. However, there are drawbacks to the strategy; it has the potential to cause problematic price inflation if policymakers pursue it too vigorously.
On Wednesday, May 12, the Labor Department released new statistics that indicate inflation in America is increasing at its quickest rate in more than a decade. Prices rose 4.2% between April 2020 and last month.
It’s important to use a little perspective when considering this, however. As the tweet below illustrates, part of the reason for this apparent spike in prices is the fact they slumped this time last year.
This is the best chart I've seen that clearly explains what's going on with inflation.
Yes, April saw the fastest inflation since Sept. 2008
But that's b/c prices were compared to last April.
— Heather Long (@byHeatherLong) May 12, 2021
Whatever the reason for this trend, it’s something our leaders need to monitor closely. There’s not much point cheering about a vibrant economy if loaves of bread start costing $10 each.
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