But what does an inflation rate of 7.5% mean for working families?
Ryan Sweet, a senior economist at Moody’s Analytics, crunched the numbers and determined that current price levels are costing the typical family about $250 a month in extra spending.
“A lot of people are hurting because of high inflation. $250 a month — that’s a big burden,” he told the Wall Street Journal.
A study by Wells Fargo, meanwhile, finds that middle-class households are particularly feeling the pinch. That’s because such households spend a bigger share of their budgets on gasoline, which was about 50% more expensive in December than a year before.
And then there’s the big wild card: Interest rates.
As the Federal Reserve prepares to embark on an expected series of rate hike over coming months, the cost of borrowing is about to climb.
That’s going to mean a bigger bite for anyone with a credit card balance, or consumers seeking funds for a mortgage or car loan.
Stir it all together and you’ve got increasingly tough times for many Americans.
If there’s a bright spot, it’s the consensus among many economists that inflation will ease in months ahead as COVID-related supply issues and shortages subside.
By then, however, that extra $250 a month in spending will, for many people, leave a financial hole to be backfilled.
Soaring prices may be a temporary phenomenon. But they can leave a lasting mark on your finances.