Inflation, which is a measurement of the Consumer Price Index or CPI, takes into account the cost of things like housing, food, transportation, clothing, and more. The Federal Reserve tries to keep inflation at 2% or less, but we were at 6.8% as of 2021. So, why are we seeing such massive inflation as we enter the third year of the COVID pandemic?
Essentially, the surge in product demand, changing housing market, rise of production cost, and supply chain breakdown has weakened our currency, which translates to increased prices, also known as inflation.
The US government attempts to control inflation with three main strategies; reducing the amount of money in circulation, decreasing bond prices, and increasing interest rates. However, currently, we are still seeing the greatest inflation jump we’ve seen in the past 30 years.
Compared to 2021, used car prices have jumped by nearly 30%; food by 8.3%; and energy by 4.6%. Sadly, occasionally the governmental strategies to reduce inflation have the side effects of inducing a recession, increasing unemployment rates, which naturally reduces spending power.
Although things look bad, there are things that individuals can do to protect themselves against inflation. For instance, purchasing rental property yields an ROI of 10% at the bare minimum. Individuals can also invest finances and invest in themselves for higher earning potential through furthering their education. Gaining financial knowledge can help individuals to come out on top even amid massive inflation.