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Saturday, May 28, 2022

Stimulus Checks: How They Raised Inflation Rates To 7.5%

Inflation in the United States is at its highest level in four decades, with a year-on-year increase of 7.5 percent in January. Because robust demand is clashing with chronic supply constraints, consumers are seeing prices climb dramatically for a range of products and services.

Inflation is one of the most difficult issues for economists and politicians to solve. The reasons are numerous, and the measures commonly used to control pricing pressures might, in certain cases, send the economy into recession.

Stimulus Checks Have Caused Inflation Rates To Increase

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The personal-consumption-expenditures price index, the department’s gauge of inflation, climbed to 6.1 percent in January from a year earlier, the highest rate in four decades. Consumer expenditure increased by 1.5 percent after inflation in January, but family income after taxes decreased by 0.5 percent.

Before Thursday’s jump — which sent the dollar to its highest level since June 30, 2020 — the greenback had been subdued in recent weeks, as rising tensions in Ukraine fueled expectations the Fed may be less aggressive in tightening policy as it attempts to rein in inflation.

As a result, the bare shelves reveal more about the precarious character of the United States’ insatiable “Empire of Consumption” than about the market’s judgment on stimulus checks. 

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DUe to stimulus checks, consumer spending increased more than expected in January, despite rising price pressures, with annual inflation reaching levels last seen four decades ago, according to US economic data. The personal consumption expenditures price index increased 0.6 percent in January after rising 0.5 percent in December due to the stimulus checks. The dollar index declined 0.459 percent to $1.1257, while the euro rose 0.59 percent. On Thursday, the euro plummeted to $1.105, its lowest level versus the dollar since June 1, 2020.

Despite Friday’s reversal, the dollar remained on track for a third consecutive week of gains. The heightened risk appetite was reflected in the stock market in the United States, with the S& P 500 up more than 2% following a late-session rise on Thursday.

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