Inflation in the United States is getting very bad and the purchasing power of the dollar has decreased significantly. According to analytics firm Moody Analytics, the average American household is now spending $250 more every month on average. Ryan Sweet, a senior economist from Moody Analytics, believes that the growing rate of inflation comes as a serious blow to lower and middle-income households. As a result of decreased purchasing power, the entire economy will start crumbling down. James Bullard, the president of the Federal Reserve Bank of St. Louis, echoed similar opinions. He believes that there is no option apart from front-loading interest rates to deal with alarming inflation rates. He added that the public is losing confidence in the government and it is high time to take some action.
If inflation rates continue to rise at this rate, it won’t be long before the economy goes into a nervous state. People will stop engaging with the market and the ripple effect will be felt by every sector. If not dealt with immediately, the ramifications will show up within a short duration.
According to James Bullard, the only solution to this problem is front-loading interest rates and providing people with the confidence to go back to the market. He said that the government has to instill confidence in the population and assure an inflation rate of not more than 2%. At present, it stands at 6 to 7 percent. Many people are strongly criticizing the Biden administration for not taking any combative steps.