How Inflation Is Hurting Iowans

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Inflation has become a big problem for people around the country. Nevertheless, it seems inflation has been worse in certain parts of the country. Iowans understand this better than anyone since the state of Iowa has been hit particularly hard. Prices in the Midwest region of the United States have increased by as much as 0.8% in January. The announcement was made earlier this month. Economists do not expect a slowdown in inflation anytime soon. Unfortunately, prices will continue going up in Iowa and surrounding states due to a handful of factors.

Inflation is hurting Iowans and Americans across the country without an end in sight. Below, readers will learn more about inflation, its causes, and how it is hurting Iowans.

What Is Driving Inflation?

The drivers of inflation are similar across the country. By definition, inflation is typically caused by cost-push inflation, demand-pull inflation, and built-in inflation. Today, Iowans are experiencing higher prices for several reasons. A handful of issues have caused the inflation rate to climb to 40-year highs. The primary causes include supply chain problems, increased demand, increased production costs, and relief funds given to Americans and American businesses. Most will blame the supply chain as well as President Biden’s American Rescue Plan which dished out more than $1.9 trillion. Since consumers have more money, they’re buying more products.

The demand for products is making it hard for manufacturers and producers to keep up. Instead, prices are climbing and shelves remain empty. While companies are generating record profits, they’re still pushing prices higher because there is nothing stopping them from doing so. President Obama tried to combat the 2008 recession by giving $787 billion in stimulus payments. Meanwhile, President Trump and President Biden have given roughly $5 trillion. Unfortunately, the handouts have pushed demand higher than ever before.

Average Price Increases

Many economists agree that inflation numbers are higher than the official numbers released by the federal government. The government has taken steps to make the picture rosier than it actually is. From January 2021 to the end of January 2022, the price of orange juice has increased by as much as $0.20. As for eggs, a dozen eggs will not cost the consumers nearly 40 more cents. Bread, ground beef, bacon, chicken, and other foods are more expensive than ever.

In addition to this, consumers are experiencing higher gasoline and housing prices. In one year, WTI crude prices have increased by more than $30. Suffice to say, these price increases are being passed down to the consumer. With the ongoing Ukraine crisis, there is a good chance that these prices are going to climb even higher. Once again, American consumers will be responsible for covering the costs.

Finally, wages are also increasing. Last year, average hourly wages climbed nearly 5% although overall wages dropped almost 2.5%. Average wages climbed from $17 an hour to $19.50 an hour. The American consumer has been left covering these increases.

Fed Rate Increases

Many have criticized the Federal Reserve for failing to act much sooner. Fed Chair Jerome Powell has been scolded for repeatedly saying inflation was transitory with this being repeated by the President of the United States. Powell has since been proven wrong. Inflation is here to stay and the Fed has been hesitant to do anything about it. The Fed is gambling on the future like they’re playing at an online casino. Could an increase in interest rates help stabilize inflation? Earlier this week, Fed Governor Michelle Bowman said she’d be willing to raise rates by more than a quarter-point at the upcoming meeting in March.

There is a good chance that these increases will be beneficial in bringing down prices although they won’t resolve the problem. Many of the issues are going to remain so inflation cannot be resolved using interest rate increases. The goal would be to slow the economy to dampen demand. Doing so could help the supply chain normalize and bring prices down.

What To Expect

For Iowans and other Americans, there is a good chance that more price increases are coming. The prices are going to continue climbing higher due to consistent supply chain issues, the prospect of war, and more. It is wise to begin finding ways to save money to avoid overspending. Anything can happen when the Fed begins increasing increase rates so it is pertinent to prepare for the worst.