The Organization for Economic Cooperation and Development (OECD) reported that commodity prices spiked 4.7% in 2021 in the US, faster than any of its peers in the G7 countries. Meanwhile, the inflation rate was just 2.5% in the United Kingdom.
In May 2022, the inflation rates in the US hit 8.6%, among the highest globally.
Supply chain disruptions, the war in Ukraine, Covid, food scarcity due to calamities like severe storms, and droughts are problems that every country faces. Yet, why did the US have such high inflation rates?
Economists believe it is because of overprinting of the dollar and high demand. It all began when the US government gave $5 trillion to its citizens to shield them from the economic shock of lockdowns.
The excess money people had, kept consumption up because people kept buying. Commodities like electronics, automobiles, and furniture were selling faster than ever. Even restaurant business and tourism surged.
It created a shortage of goods in the market, leading to higher prices. Many economists blame the persistently high inflation on the Federal Reserve because the central bank printed trillions of dollars during the pandemic to send stimulus cheques to citizens.
The Fed has also been accused of reacting too late to the onset of inflation. The central bank had delayed any action saying that inflation was transitory and even said it had peaked last January.
Wage gains lagged last year, but the stimulus cheques cushioned people from rising prices. President Joe Biden’s approval ratings are dipping fast due to intensifying inflation concerns.