The June consumer price index released on Wednesday revealed the nation's latest inflation levels, including food and energy.
According to the Labor Department, inflation increased to 9.1% over the last 12 months, the fastest increase in prices since November 1981.
WUSF's Cathy Carter speaks with Michael Snipes, an economics professor at USF Sarasota-Manatee, about why prices continue to rise and when they might level off.
Why is inflation so high right now, how did we get here?
What was kind of the initial trigger, the catalyst really, was the economy starting to come back from the shutdown of 2020 and 2022. There was a lot of pent-up demand in the economy and there wasn't really a lot of purchasing going on, and the purchasing that was going on was really just kind of focused on people's essentials, so on housing medical care, food, and things of that nature. And that's part of the reason why we're seeing the biggest increases in prices in those areas, because they're necessary goods, and that's where your money is going to go first.
But now, the job market has stabilized, people are coming back into the labor force. But we're still seeing inflation, we're still seeing high prices. What's causing a lot of that really is kind of your big corporations or bigger companies kind of taking advantage of that, because one of the things that we are seeing is record-high profits pretty much across the entire economy. And so, if we've got kind of one group in, in our working class, and our consumers, and a lot of them are struggling because of high prices.
But at the same time, we have record high profits; those things don’t match up. So, the catalyst was yes, that increase in demand. But that's not really enough to explain why it's kind of as bad as it is for as long as it's been.
So, what can be done about that? Corporations, private companies, can do what they want to do.
Absolutely. It's really going to have to come down to political will more than anything. One thing that I don't think a lot of people realize is that there really is a lot of corporate concentration in the economy. So, there's a difference between brands and goods. Really all of those are just brands within one larger company. And one of the things that can't be done is, we can introduce some sort of antitrust legislation and break it up and actually get some real honest competition, as opposed to kind of the illusion of competition. That's one thing that could work.
One of the things that has been done is the Federal Reserve has increased the federal funds rate. And what that does is effectively raise interest rates for the entire economy. And the whole idea there is that if we raise interest rates, that's going to encourage people to save more. And so, if you're saving more than that, it means that you are spending less. And so that's one way that they're kind of trying to reel in demand, is that if people are spending less, then demand is going to go down. And that's going to help drive prices down.
Well, if history is an indicator, the economy will eventually turn around. But when can consumers start to see prices going down?
I'm looking at some projections right now on my computer. And we're expected to go down to kind of what is a more average or more normal or expected inflation rate. But the projections that I'm seeing, it's not going to be for a couple of years. And that generally follows the trend for these big macroeconomic fluctuations.
So, the future is looking good, at least in terms of inflation rates coming down, but it's still going to be a while. I mean, it's not going to happen overnight. We're looking at least a year before they get back to kind of quote, unquote, normal ranges.
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