Nebraska families are feeling the pinch of high inflation

A Nebraska economist explains the reasons for this inflation and gives advice to consumers.

LINCOLN, Neb. (KLKN-TV) – Bulk buying, couponing and garage sales.

These are just some of the ways Lincoln’s mother, Amber Powell, makes the most of her family’s money.

“So we try to do lots of activities that are always free in general. But yeah, we’re not affording to do any extra activities right now,” Powell said.

His family rarely goes out to eat, removes unnecessary things at home and drives as little as possible. Powell said it was the worst year she had seen in a long time with rising prices.

“Just everyday items, I can’t believe how skyrocketing they are,” she said.

The spike in inflation is the highest we’ve seen since 1982. The latest Consumer price index released in February shows that consumer prices have jumped 7.5% over the past year, with food prices rising 7% and energy prices 27%.

Creighton University economist Ernie Goss said the Federal Reserve should have acted now by raising short-term interest rates.

“The Fed is behind the eight ball, as they say, is behind the curve. In other words, they should have already acted; they do not have. And they get, they let inflation go a bit, in my opinion, to over inflation, because of their inability to act,” he said.

So what is causing this inflation? Goss attributes it to three areas: spending, supply and demand, and labor shortages.

First, spending has been increased with the stimulus packages granted during the pandemic and the infrastructure bill which is still in the works.

Additionally, “the Federal Reserve has increased the money supply by 35-40%, since the start of the pandemic, by 35-40%,” Goss said.

Second, supply and demand. Transportation bottlenecks across the country and the world have a big impact.

“And that means, of course, less and less of the goods coming onto the shelves, and you have buyers competing for those limited goods, which drives up the price,” Goss said.

Third, labor shortages. In Nebraska, we have the lowest unemployment rate ever at 1.9%, which means companies are competing for these limited workers, driving up their costs. Then these companies pass some of those costs on to the consumer.

Goss said the upside right now is that we’re not in a recession yet.

“And the scary thing, the really scary part, is that we could have what is called stagflation. That would be mounting inflationary pressures, even as the economy is growing negatively. In other words, we are in a recession. We are not there yet.

So what advice does he have for the average person?

“One thing is certainly that you can buy, for example, I bonds, those are being sold by the US Treasury, and they’re inflation protected right now, they’re paying 7.2% interest on a obligation I,” Goss said.

He also said if you need to borrow money, do it now and don’t wait. Also, it is important to get a fixed interest rate on any deal. If you can, put off buying a car, as this is an industry that has seen a steep rise in prices.

Powell and his family focus on their needs rather than their wants.

“And, you know, any kind of extra desire that we want right now, we put it on the back burner. There are a lot of “wants” around my house that I may not be able to do this year due to rising costs. You know, I might have to completely count them and put them off for a few years if I can,” she said.

The Federal Reserve is due to meet March 15-16, when Goss expects it to raise short-term interest rates from 1.5% to 1.75%. He said if the situation continues to escalate, the Fed may have an early conference call to raise rates, but that’s highly unusual.

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