PORTLAND, Ore. (KOIN) — U.S. inflation is at its highest since the 1980s, and people might be wondering what that means for their purchasing power.
KOIN 6 News spoke with University of Oregon Economics Professor Tim Duy about what it means to consumers with inflation soaring 8.5% over the past 12 months, according to the Associated Press.
“Wages – particularly in the short run for this last month – simply aren’t going to be able to keep up with that pace of price increase,” said Duy. “Consequently, consumers have to find methods to either cut down or cut back on their spending to pay for energy costs last month or find other sources of spending power.”
To help with inflation, consumers might opt for credit cards or digging into their savings.
If you’re wondering if certain goods or services will see an increase over others, there’s no such luck. Duy said he has seen broad base price increases for both, with gas prices rising in March and large increases in food costs overall.
“Both of those things tend to have a disproportional impact on lower-income groups who spend a bigger part of their budget on food and energy costs,” he noted.
However, people did see the prices of used cars go down in March, “but young people don’t buy a used car every day. … They buy food and gas every day,” added Duy.
This might be tough for people to get used to considering consumers went through a period of low and stable inflation prior to the pandemic.
“It’s not like they need to pay attention to it. I think they’re forced to pay attention to it,” said Duy regarding inflation.
What does this mean for people in our region?
“There could be – in theory – incentive, or even a greater incentive and a period of rising prices for out-of-state sales tax individuals to try and minimize their tax bill by coming to Oregon,” he said.
As for what can be done, Duy said there are not great “near term” tools to address inflation.
“Fundamentally, demand in the economy is outstripping supply. We need to really tone down overall demand and typically you do that through higher interest rates, which the Federal Reserve has started,” explained Duy.
He added that people are probably seeing some impact from those rising interest rates already, such as potential homeowners looking at higher mortgage costs. This will impact some people, said Duy, by dissuade them from purchasing homes right now and put a downward pressure on housing prices.
The federal government can also cut spending and raise taxes on the fiscal level, but that option is not on the table quite yet.
For those worried about the current situation, the UO professor noted that the economy is currently strong.
“We’ve had strong job growth, and it might be some matter of months before we see relief on the inflation front at a fundamental level,” he said.
However, there is a concern that underlying inflation has moved up, so people should watch out on how much relief they will eventually get.