Why Is Inflation So High Right Now?

© Getty Images
A man wearing a medical mask while selecting produce in a grocery store.

By Maurie Backman, The Motley Fool

These days, many people are bemoaning the fact that life has gotten so gosh darn expensive. Gas costs more. Grocery prices are up. And forget those sweet holiday deals; this year, many people will be lucky to get their hands on the things they want, and they'll most likely pay a premium for them.

In October, the Consumer Price Index rose 6.2% on an annual basis (meaning, the cost of consumer goods was up 6.2% from a year prior). So what's causing such rampant inflation? There are a few factors that are coming together to create a scenario that's wreaking havoc on consumers' finances.

Low supply and high demand

If you ever took Economics 101, you may recall the relationship between supply and demand -- namely that when there's not enough supply of a given commodity to go around, demand increases, and so do prices. That's what's been happening in recent months.

During the pandemic, a number of key supply chains were disrupted or shut down. Now those supply chains are trying to ramp back up -- but that's not happening quickly enough.

Meanwhile, the economy has come a long way from where things stood a year ago. Currently, unemployment is lower and jobs are plentiful. Consumers have more money to spend -- and they're eager to spend it. But since there's not enough supply to keep up with consumer demand, prices have been rising.

The interesting thing about inflation is that it's easy to regard it as an indicator of a poor economy. But actually, inflation is often a sign of a healthy economy. If there were less demand for products, prices wouldn't be up so much. And so while most of us aren't going to go out and celebrate inflation, it's actually a sign that our full economic recovery may be closer.

How to combat inflation

Periods of inflation can be harmful to individual finances, and that's what may be happening right now. If you're having a hard time keeping up with rising living costs, there are a few steps you can take to make things easier.

First, get on a tight budget. Figure out exactly how much money you need to spend on essentials given today's higher costs, and only once you've accounted for those expenses should you allocate money to non-essentials, like entertainment.

Next, consider boosting your earnings with a side hustle. There are plenty of gigs that will allow you to pad your savings account and scrounge up more spending money.

Finally, be savvy about credit card usage. There are plenty of cards out there offering generous rewards and cash back for everyday purchases. Research your options and sign up for a card that will put more money in your pocket for essentials like gas and groceries.

Better yet, find a credit card with a sign-up bonus that has a spending threshold you're likely to qualify for. For example, if you qualify for an offer that will reward you with $200 in bonus cash for spending $1,500 within three months of opening your card, that's a deal worth chasing -- especially if you normally charge $500 worth of expenses or more on a credit card each month.

Unfortunately, high levels of inflation may be with us for quite some time. Do your best to maintain your buying power and steer clear of debt until things settle down.


Made with in NYC

Adventure Travel,45,AI,14,Amazon,33,Apple,146,Apps,20,Arts & Culture,12,Beauty & Style,501,Bitcoin,1,Body & Mind,6,Bollywood,29,Books,5,Budget Travel,25,Business,652,Career & Education,45,Careers & Education,19,Celebrities,40,Computers,23,Coronavirus,25,Crime,52,Elections,126,Emoji,1,Entertainment,1108,Europe,1,Facebook,105,Fashion,4,Fitness,32,Food & Drinks,150,France,1,Gadgets,26,Games,191,Good News,333,Google,96,Health,1579,Healthy Living,2,Hollywood,1,Home & Garden,46,Huawei,11,Industry,161,Instagram,16,Interesting,3,Internet,67,Investing,37,Lifestyle,378,LinkedIn,1,Markets,34,Microsoft Windows,3,Money,12,Movies,105,Mozilla,1,Music,121,Nature Travel,28,News,1388,Occasional Travel,7,Offbeat,405,Opinion,104,OS,1,People,188,Personal Finance,19,Politics,176,Real Estate,22,Relationships,13,Samsung,62,Science,568,Seasonal Travel,14,Security,22,Small Business,37,Smartphone,98,Social,38,Sports,20,Tech,549,Technology,164,Tesla,6,Transportation,26,Travel,458,TV,287,Twitter,24,U.S.,271,Urban Travel,13,Vacation Travel,26,VR,6,Weight Loss,5,Weird,244,Wellness,7,World,308,
item News | Breaking News, US News, World News: Why Is Inflation So High Right Now?
Why Is Inflation So High Right Now?
There are a few factors that are coming together to create a scenario that's wreaking havoc on consumers' finances. News | Breaking News, US News, World News
Loaded All Posts Not found any posts VIEW ALL Read More Reply Cancel reply Delete By Home PAGES POSTS View All RECOMMENDED FOR YOU LABEL ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS PREMIUM CONTENT IS LOCKED STEP 1: Share to a social network STEP 2: Click the link on your social network Copy All Code Select All Code All codes were copied to your clipboard Can not copy the codes / texts, please press [CTRL]+[C] (or CMD+C with Mac) to copy Table of Content