AMARILLO, Texas (KAMR/KCIT) — Consumers are feeling the effects of inflation lately, with the national inflation rate hovering around 6.2%, the highest it has been for about 20 to 30 years.
Dr. Ryan Mattson, an assistant professor of macroeconomics at West Texas A&M University, said a money supply issue is largely driving the increase.
“In response to the pandemic and the lockdown, the Federal Reserve is pumping a lot of money into the system,” said Dr. Mattson. “They were growing their asset balance sheets, by about 80%, almost each month in 2020, which basically means that they were buying up a lot of assets to push money out.”
Matt Ramsey, a senior trust investment officer at Amarillo National Bank, said there are other drivers as well.
“Inflation is a phenomenon of one, the amount of money in the system, two, demand, and three, supply, and we saw a shock to supply and a shock to demand,” said Ramsey.
Dr. Mattson said inflation is affecting consumers on just about all purchases, whether it is groceries, gasoline, or other goods.
He said families will have to be smart with their finances.
“They’ll have to expect that these price increases are probably going to stick around for a while,” said Dr. Mattson. “There’s really not much else to do aside from try to budget carefully what you’re going to do in the next three to four months.”
According to Dr. Mattson, the Federal Reserve is responding, slowing the amount of money pumped into the system, hopefully, the inflation rate will return to about 2-4%.
He added, “But in the short run, we can’t really do much to deal with inflation, except to try and find the good deals when we see them and budget wisely.”
Dr. Mattson also said since the job market is recovering well, now could be the time for employees to ask for a higher salary or start looking for a job with a higher wage.
Ramsey echoed that sentiment, saying, “What we’re encouraging people to do is to be very deliberate with their finances to really get a grasp on what inflation is currently and what it’s expected to be, and sit down and to be very honest with their budgets and to look at what they expect to get as far as raises from their employers, and to remember that those higher dollars that they’re seeing aren’t worth quite as much as they were a year ago.”
Ramsey said while inflation is widespread, it is not all bad.
“So we’re seeing it really across the board. Housing is particularly high, we’re really not seeing it quite as much in oil and gas as we have in the past, but other commodity prices are higher, which is good for our economy because we are commodity producers, but it also does have a negative impact on the consumer,” Ramsey said.