AMARILLO, Texas (KAMR/KCIT) — As we continue to feel the pain of inflation, a local economist explained why it might be time for many to think harder about budgeting and saving money.

Amarillo National Bank’s Senior Vice President and Senior Investment Officer, Matt Ramsey, said over the past couple of years during COVID-19, the government directed funds toward communities, individuals, and businesses in need.

“That created a lot of demand as those funds were funneled to people and institutions. So there’s a big jump in demand,” Ramsey said. “At the same time, we had the Federal Reserve Bank cutting interest rates, and as they cut interest rates and began to buy bonds, they also increased the money supply in doing that.”

Ramsey said the most recent Consumer Price Index showed it to be at 7.9% in February.

“So if you want to keep up with inflation, then wages would need to go up 7.9%.”

Plus, he said the labor market is tight as many people re-enter the workforce and the Fed raises interest rates.

“What they’re attempting to do is slow the economy. So it may be that we see a little bit of a slower economy and that folks may not have that ability to ask for higher wages that they did, let’s say six months ago.”

According to Ramsey, now is the time to start saving money if possible.

“When they raise interest rates, that means that your savings accounts and your CDs will be higher. So there’s an opportunity now for folks to save at a higher rate than what they have been able to do so,” he added. “But it’s likely that there will be some pain involved as rates go from perhaps up to 2% to 3%, by the end of the year…”

Ramsey said there is a silver lining to some of this inflation.

“In the Panhandle, we are an agriculture-based economy. So, to some extent, we benefit from higher commodities,” he said. “However, mostly higher prices affect us at the gas pump, and then through transportation of other goods. So then it becomes embedded in those goods, which we all use.”

He also said the conflict between Russia and Ukraine is adding to the U.S.’s already high gas prices.

“They created a very, very accommodative monetary policy, all of that created a boost in demand. At the same time, we had supply issues across the world with transportation with container ships, and now with the Ukrainian crisis, we have oil as a part of that supply constraint as well,” said Ramsey. “So both of those things came together to create the worst inflation we’ve had in 40 years.”

When asked how much those increased prices could be attributed to inflation versus corporate greed, Ramsey said, “Over the last several years, we’ve seen the money supply grow about 40%, which is a huge number. And so that is really the predominant cause of our inflation. And the corporate profits are high but they also have higher costs, which are going to hit them in the future.”

Ramsey encouraged people to cut back on spending as needed for now.

“It will be a little bit painful for folks as they adjust their budgets to find where those extra dollars are going to come from that they’re spending now on a little bit higher energy prices and higher food prices,” he said. “And so it’s probably a good time to tighten your belt a little bit, just to prepare for a little bit of an economic slowdown.”