How the expectation that inflation accelerates in the United States will affect your pocket | The State
In 2021, prices are likely to skyrocket in many sectors in the US.
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csamhaber / Pixabay
In almost 40 years, the United States has not experienced significant inflationBut that may change soon, due to a large-scale federal deficit, stifled demand due to quarantine restrictions, and a change in monetary policy from the Federal Reserve.
But what exactly is inflation?
Inflation is the opposite of deflation, which is a decrease in price levels.
Since the 2008 financial crisis, the US economy has experienced very low inflation and even deflation. Outside of some sectors, like healthcare, people in the US haven’t had to deal with many price increases.
However, In 2021, US citizens are likely to see prices skyrocket in a good variety of sectorsThanks in part to COVID-19 vaccines that will likely drive demand for tourist travel and sporting events, according to Yahoo.
Hyperinflation, which is generally defined as inflation above 50%, is destructive to an economy. In recent years, hyperinflation has destroyed the economies of countries like Zimbabwe, Venezuela and Argentina.
But you should not worry about this happening in the US, since Inflation expected in the United States in 2021 is 2% to 4%, not close to what is expected in Venezuela for 2021, which is 438%.
On the other hand, there could be some good things with moderate inflation. When it happens, high prices in the economy encourage companies to invest and expand. Interest rates rise, so banks start paying interest on checking accounts again. AND higher wages, which will occur in certain sectors of the labor market, give workers an incentive to spend more money.
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