(Ames) The United States is experiencing some of the highest inflation its seen in the past 40 years.
Dr. Chad Hart, Professor of economics at Iowa State University, says inflation is ramping up for various reasons. One factor is the residual effect of COVID-19, causing the supply chain issues affecting the nation today.
Hart says another factor causing these ballooning prices is the government-support money pumped into the economy. For example, trade aid money and COVID payments in 2020 and 2021.
Dr. Hart says the economy is likely to slow down.
Hart says the essential tool in the Government’s toolbox is the ability to raise interest rates to slow down inflation.
Dr. Hart says the higher interest rates will back off demand, leading to lower prices. Since the first week in January, when the Dow Jones Industrial Average and S&P 500 hit all-time highs, both indexes have tumbled into correction territory with losses exceeding 10 percent. Couple this with the Nasdaq Composite has fallen 31 percent.
