Although inflation is at a 40-year high, it isn’t affecting all consumers equally. It could become a self-fulfilling issue though if workers demand higher wages to offset price increases. Inflation also might signal the Fed to increase interest rates to slow it down, which could in turn stagnate the economy and bring on a recession.
The Consumer Price Index shows a year-over-year increase in inflation of 7.5%, but the Fed’s preferred measure of inflation is the Personal Consumption Expenditures Price Index (PCE), which shows a rise of 5.2%.
The reason inflation is affecting Americans differently is because we all spend differently. Younger populations might spend more on education and technology, while older populations pay more for medical and healthcare services. Two of the largest items being factored into American spending include cars and housing. Used car values have outpaced new cars, and homeowners with a fixed mortgage might pay less than renters.
