The main argument in the article Inflation hits the fastest pace since 1981, at 8.5% through March is how Inflation is significantly increasing. Due to this increase, the current inflation rate in the U.S. is at 8.5%, and it is heavily linked to hiking prices of gasoline across the world. Initially, the inflation rate was moderate due to demand and stubborn pandemic–related shortage of supplies, but the war in Ukraine has worsened the situation. The disruption of supply and military conflict in Ukraine has led to an increase in the prices of fuel and groceries (Smialek, 2022). Although Inflation has hit hard on households because a significant share of their budgets is being used on necessities, economists and policymakers have predicted that Inflation in goods will stabilize. Decrease in used car prices and apparel, and government measures, are the reasons for predicting stabilization. Some of the measures being put in place by the government are the possibility of banning sales of higher-ethanol sales. Generally, the U.S. is experiencing one of the fastest increasing inflation rates caused by hiking prices of gasoline. Has Federal Reserve is trying to stabilize.
In my opinion, the article is relevant because it discusses Inflation and its effects on both the government and households. When it comes to the government, inflation forces us to take measures that will moderate it. On the other hand, families are affected by an increase in the prices of necessities. Additionally, the journal is relevant to macroeconomics concepts such as demand & supply, Inflation, Consumer Price Index (CPI), and price levels. First, it is relevant to the demand & supply concept as it discusses how strong demand and supply shortages have been caused by the pandemic outbreak (Smialek, 2022). Secondly, the inflation concept is discussed in the entire article as it tries to show the previous rate and what people should expect in the future. Thirdly, the CPI concept is demonstrated in the monthly report by Labor Department that reveals fuel prices have jumped to record levels and grocery costs soared. Finally, the price levels concept is identified when it indicates that the fuel prices have record increase levels.
Economists’ and policymakers’ predictions are crucial as they give households hope that prices of necessities are likely to reduce. Additionally, their predictions show the leading causes of the fastest inflation rate since 1981 (Smialek, 2022). Further on, the predictions reveal that the inflation rate is expected to stabilize due to a decrease in the price of used cars and apparel. The predictions of economists and policymakers are in line with the economic forecasting concept as it tries to predict the future condition of the economy using widely followed indicators such as gasoline. In addition, while doing economic forecasts, some statistical models are usually developed and used on other macroeconomic concepts. The models developed can be used to forecast interest rates, retail sales, and gross domestic product growth rates. Generally, the economic forecasting concept is fundamental as it is used in different ways apart from being used as an indicator. Therefore, the federal government should always use economic predictions as a reference while developing interventions as they have an in-depth analysis of macroeconomics.
From another perspective, the volatile concept is primarily applied in the article. For instance, it argues that a measure that strips out volatile food and fuel prices decelerated slightly in February, decreasing used cars and apparel prices. This argument showed that food and fuel prices have become highly volatile due to the fast inflation rate, but it looks like February has been a good month due to moderate Inflation (Smialek, 2022). Further on, the article reveals that the inflation rate is at its peak, leading to an increase in the national average gallon of gasoline. In March, the volatility of necessities will be high, and households will spend a larger share of their budget purchasing them. There are numerous risks when needs become highly volatile in an economy. The main customers will reduce their spending habits, leading to the closure of businesses that are not offering products and services that are basic needs. Another risk is that there will be a decrease in investment and output for export products due to rising uncertainty. Therefore, high food and fuel price volatility will affect the work, reducing gross domestic products.
The author of the article “Inflation hits the fastest pace since 1981, at 8.5% through March” uses the volatility and economic prediction macroeconomics concepts to explain how Inflation in the U.S. is at its peak. The volatility concept is used to show the unpredictable increase in gasoline prices. This has affected the entire economy; the CPI has indicated a rise in groceries price. In most cases, when there is a high volatility rate of basic needs like is being experienced in the U.S., households tend to reduce their expenditures to ensure that they afford the necessities (Smialek, 2022). On the other hand, economic prediction reveals the previous inflation rate and what they expect in the future. The author shows that the inflation rate in March was at its peak, but it is expected to slow down due to intervention by the Federal Reserve in the coming few months. It is crucial to note that the economist considers numerous factors before economic prediction.
In general, the fastest inflation rate that the U.S. is facing due to the hiking prices of gasoline is significantly affecting households and the government. In households, the cost of necessities such as groceries has become highly volatile. This has led to people reducing their spending habits, and if this persists, some businesses will be forced to close down. On the other hand, the government is being affected by threats of being voted out because they feel that the Federal Reserve is not doing its work of controlling Inflation (Smialek, 2022). Although the government is putting in measures to moderate Inflation, it is yet to affect the increase. The rates are expected to increase in the future, but there is no assurance as the war in Ukraine does not have an exact date of ending, and new closedowns have started to emerge in China.
In conclusion, it is not the U.S. only experiencing the fastest pace of Inflation; this is a worldwide issue. Some countries are experiencing a severe rate of Inflation that has led to a shortage of gasoline. This fast pace of Inflation has been caused by factors such as current lockdowns being experienced in China, the war in Ukraine, and the economic recession of countries after suffering from disruptions caused by Covid-19. Therefore, the U.S. is performing well because the Federal Reserve is trying to stabilize the inflation rate.
Reference
Smialek, J. (2022). Inflation hits the fastest pace since 1981, at 8.5% through March. Nytimes.com. Web.