One of the worrying developments of late time is the rise of inflation. Consumer prices in the US have soared since April, recording annual inflation rates of 5.4% in June and July. Such rates have not been seen for well over a decade.
There are several factors behind the rise in inflation, one of which is the imbalance between supply and demand. Pent-up demand for various products and services in the first half of the year, combined with supply shortages due to supply chain interruptions — both Covid-related and non-Covid related — have led to price increases. These are the basic rules of supply and demand at work. Another factor is the massive stimulus, both monetary and fiscal, injected by the US government into the economy. The effects of these events on prices were also to be expected, according to basic economic theory.
