2022 brings excitement, positivity, and new attitudes, but also the remaining problems left over from 2021. One important holdover from the previous year is heightened inflation and high 2022 prices effecting the economy. Economists, as reported by CNN’s Anneken Tappe, observed the highest inflation in 40 years in 2021, and it does not seem to be going down in 2022. The Consumer Price Index and the Personal Consumption Expenditure Index grew at a rapid rate, resulting in high economic inflation and higher prices on goods and services.
Why Are Prices So High?
The truth is that there are a few reasons behind the recent price rise. Most predominately is the continued pandemic and the Omicron Covid Variant. The pandemic has reshaped how consumers participate in the economy and what goods are in constant demand. In addition, the pandemic has a direct effect on energy costs, with constant effects on travel both locally and internationally. As restrictions ease and people travel more, cost will increase significantly.
Other factors that contribute to inflation are supply chain issues, bad weather, and price hikes for food and rent. Rent and food are most notable because they are constant, universal expenses. In the last few months of 2021, rent had increased to the highest it had been in 20 years. Continued issues with supply chain management also contribute, as goods increase in demand, but the supply lacks the ability to meet that same demand.
All of this contributes to an inflated economy and hinders economic recovery.
What Can Be Done
The Federal Reserve had issued a statement at the end of 2021 that it would combat inflation by slowing, and eventually stopping, its pandemic relief. This is an effort to slow inflation and steady economic growth, making people unable to spend too much to fast. It’s a win-lose situation, as the economy will have more opportunity to heal, but consumers might be penalized in the short-term.
Why It Matters
Everyone that participates in the economy is affected by inflation. This very inflation was the reason behind 2022’s COLA increase for Social Security benefits. The SSA uses a variant of the Consumer Price Index to determine increases in Social Security. That index serves the purpose of helping seniors combat inflation while on a fixed income, but it isn’t necessarily enough. High 2022 prices mean less savings, and that’s a universal truth whether you’re retired or not.
Understanding how much you save, and how much you can use to cover your expenses, are vital to weathering an inflated economy. That makes it easier for your retirement to thrive in the long-term, which is something the Council for Retirement Security is working to ensure for all Americans.