How inflation spiked then returned to target range
UC economics professor helps ABC News explain how the Fed has reined in inflation
After years of disruptions, inflation has decreased and now is near the Federal Reserve’s target rate of 2%, ABC News reported.
Hernan Moscoso Boedo, PhD, associate professor of economics
The COVID-19 pandemic disrupted global supply chains, with other factors such as the war between Russia and Ukraine adding to the problem.
Meanwhile, the United States government during both the Trump and Biden administrations provided trillions of dollars for Americans to stimulate the economy. The funds helped drive demand for goods, and added to supply chain issues.
“Now you have money, and nowhere to go and buy things,” said Hernan Moscoso Boedo, PhD, an associate professor of economics at the University of Cincinnati’s Carl H. Lindner College of Business.
To rein in inflation, the Fed increased interest rates to their highest level in more than two decades. That made borrowing more expensive, which along with reduced demand has helped ease inflation.
“Over the last few years, we’ve seen less money in the market because of the interest rates,” Moscoso Boedo said.
Featured image at top: A woman makes a purchase. Photo/Blake Wisz via Unsplash
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