In 2020, the economy and inflation took a hit worldwide as the COVID-19 pandemic ran rampant, causing the U.S. Federal Reserve to print $4 trillion, which is approximately 40% of U.S. dollars, as a precautionary financial measure to secure the economy.
“The coronavirus pandemic will mark the dividing line between the deflationary forces of the last 30 to 40 years and the resurgent inflation of the next two decades,” said former UK central banker Charles Goodhart to the Wall Street Journal.
The acceleration of money printing, nearly 80% of all U.S. dollars in existence, has resulted in further depreciation of the U.S. currency and caused inflation.
The question is now, will inflation linger on for years to come? With Russia invading Ukraine, U.S. citizens are likely to have an increase in the price of goods.
“I don’t want to make a prediction exactly as to what’s going to happen in the second half of the year,” said Treasury Secretary Janet Yellen to CNBC News. “We’re likely to see another year in which 12-month inflation numbers remain very uncomfortably high.”
In the U.S., the consumer price index (CPI) increased in February to 7.9% from a year ago, which was the highest level since January 1982.
Shelter costs have risen 0.5%, for a 12-month increase of 4.7%, the quickest annual increase since May 1991. Food prices have jumped to 1%, making it the fastest month gain since April 2020, and gas prices have accelerated to 16% as of March 10.
Mike Loewengart, managing director of investment strategy E-trade, says that inflation is no shock and is to be expected due to what is occurring in Ukraine.Â
“The market likely already priced the inflation increase accordingly and is instead intently focused on Ukraine and the downstream impact from commodities, which are already sending shockwaves through the market,” said Loewengart.
