Natural State News

Dr. Joseph Mauro, assistant professor of economics at the University of Central Arkansas and an expert on macroeconomics, wants Arkansans to be aware that there will be some changes in the relative prices of goods and services in the coming months due to increased inflation.

Inflation is projected to rise by over 60% from its pre-COVID-19 low of 1.4% to 2.3% or more, according to Sen. Rick Scott (R-FL).

“If there are increased levels of inflation moving forward, I would think the main area where most Arkansans would be impacted in the short run would be in their food and energy expenditures, which tend to be volatile,” Mauro told Natural State News. “If Arkansans are planning a trip/vacation this summer, there is a bit of price spike in the transportation and hospitality sectors so that may be more expensive as well.”

The increase in inflation is expected to be transitory and return to normal levels beginning in 2022, according to former Federal Reserve  Chair and current Treasury Secretary Janet Yellen, Business Insider reported.

“If inflation persists longer than expected, we may see the real value of savings deteriorate and interest rates would most likely rise as well,” Mauro said. “Inflation tends to be more problematic over longer durations of times.”

The United States money supply has increased by 40% since the beginning of the COVID-19 crisis, as reported by The Federalist. Before the period of high inflation of the 1970s, the money supply had increased by just 13%.

“Rapid expansion of the money supply is the single policy most likely to lead to accelerated rates of inflation,” Mauro said. “We are most likely experiencing ‘demand-pull’ inflation which occurs when prices increase to keep up with high demand and may not be attributed to any one policy, but rather a response to the economic shut-down ending and COVID-19 restrictions being lifted throughout the country.”

Former Clinton administration Treasury Secretary Lawrence Summers warned the recent economic stimulus passed by the Biden administration will likely “set off inflationary pressures of a kind we have not seen in a generation," The Federalist reported.

According to a Shopkick survey, 83% of Americans are tightening their budget this year due to inflationary pressures, and 54% are “very worried” about inflation. The Shopkick survey also found that over 90% of respondents noted an increase in grocery and gas spending since Biden took office.

The Congressional Budget Office released a report predicting that if the current tax and spending laws don’t change by 2031, the U.S. national debt will reach 107% of the gross domestic product, the highest level in U.S. history. The report also states that the current federal debt held by the public, which was 100% of the U.S. GDP at the end of the fiscal year 2020, is projected to reach 102% of GDP by the end of 2021.