In recent decades, inflation has been a boon to middle-class US households’ balance sheets, thus helping to mitigate the increase in overall wealth inequality. Those worrying about the recent uptick in inflation – beginning with the Federal Reserve – should bear this in mind when considering whether and how much to tamp it down.
NEW YORK – Anxiety about inflation, among citizens and politicians alike, has been peaking recently. In the United States, the year-on-year increase in consumer prices reached 7.5% in January, the highest rate since February 1982. If people’s incomes increase by less than the rate of inflation, their real incomes decline, and they cannot afford to buy as much stuff as before. This is the “income effect” of inflation.
NEW YORK – Anxiety about inflation, among citizens and politicians alike, has been peaking recently. In the United States, the year-on-year increase in consumer prices reached 7.5% in January, the highest rate since February 1982. If people’s incomes increase by less than the rate of inflation, their real incomes decline, and they cannot afford to buy as much stuff as before. This is the “income effect” of inflation.