Okay, it's time to check your budget. Have you noticed that you're spending more on things like groceries? You're not alone!
Over the past year, the price of goods and services has increased by 4.2% - the largest increase in 13 years.
Our Financial Expert, Mark Grywacheski from the Quad Cities Investment Group, joined us on Good Morning Quad Cities on Monday, May 24th, 2021 to explain what's causing this sudden spike.
"There's a couple of key factors," he explained. "Global supply chains of materials and component parts have yet to fully recover from pandemic-related shutdowns. These disruptions have constrained manufacturing output- which has increased the cost of what limited supplies are available.
But also, it's this flood of cash that's been sitting on the sideline in bank accounts during the pandemic now hitting a vaccine-fueled reopening of the economy. Then you add nearly $6T in government stimulus money and direct payments to Americans. All this cash is driving prices higher."
Grywacheski said he believes this is going to be a long-term issue, even though he explained that the Federal Reserve argues this inflation is short-term and caused by these supply chain disruptions:
"One of the classic definitions of inflation is 'too much money, chasing too few goods.' All this money being thrown into the economy fuels consumer spending which pushes prices higher."
"This graph shows the amount of money currently in our economy- which has skyrocketed," he continued. "Over the past 12 months, the U.S. money supply has increased by 25% - the largest annual increase in 80 years - and Wall Street is saying you can't have the government print all this new money and throw it into the economy without consequences. And those consequences are higher inflation."
For Grywacheski's inflation forecast for the rest of 2021 and 2022, click the video above.