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The 2021–2022 inflation surge is the elevated economic inflation throughout much of the world that began in early 2021. It has been attributed primarily to supply shortages caused by the COVID-19 pandemic, coupled with strong consumer demand driven by historically robust job and wage growth as the pandemic receded. [1]
There has been a perfect storm in 2021, which is leading to higher prices. Several factors lead to high inflation, including: Now, barring currency depreciation, all of the other factors support higher prices. Why are prices for everything going up?
The demand-supply mismatch is the simple reason behind most inflation, including now. There’s also cost-push inflation as higher raw material prices force producers to increase finished product prices. Prices of all commodities have spiked over the last year, which is adding to the inflation.
The most recent Consumer Price Index (CPI) inflation report showed that prices rose across the board in December. Overall, prices climbed 7% year-over-year, the largest increase since June 1982. The Bureau of Labor Statistics (BLS) cited big gains in the food and used vehicle p
What is inflation?
Inflation is a loss of purchasing power over time: It means your dollar will not go as far tomorrow as it did today.
In the short term, high inflation can be the result of a hot economy — one in which people have a lot of surplus cash or are accessing a lot of credit and want to spend. If consumers are buying goods and services eagerly enough, businesses may need to raise prices because they lack adequate supply.
Officials say they do not yet see evidence that rapid inflation is turning into a permanent feature of the economic landscape, even as prices rise very quickly: The C.P.I. measure rose by 6.8 percent and P.C.E. climbed 5.7 percent in November from a year earlier, the fastest pace since 1982 for both indexes.
High or unpredictable inflation that isn’t outmatched by wage gains can be especially hard to shoulder for poor people, simply because they have less wiggle room.
Really high inflation typically spells trouble for stocks, said Aswath Damodaran, who teaches corporate finance and valuation at New York University’s Stern School of Business. Financial assets in general have historically fared badly during inflation booms, Mr. Damodaran said, while real assets like houses have better held their value.
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