With inflation continuing in the United States, several households have been losing out on their purchasing power- and it is believed that a stimulus check payment could help with that. As it stands, prices have increased by 8.5% when compared to the previous year. This has also resulted in increased costs of fuel that have been driving the surge. As reported by the Bureau of Labor Statistics, the gasoline index increased by 18.3% in March, and then went on to account for almost half of the items in one’s monthly increase.
Will A Stimulus Check Solve Inflation?
As the prices of fuel increase, the transportation costs for firms have also been increasing. Most of the companies did pass along this increased cost to the consumer by charging exorbitant higher prices. What seems to be pretty clear is that the current increase in inflation that has been seen in the market doesn’t seem to be affecting every product in a similar manner. The Consumer Price Index went down by 0.4% in March when food and energy were completely removed from the average. So in such a situation, how beneficial can a stimulus check payment be?
Interestingly, as a way to combat this inflation, the Federal Reserve has announced that it would be raising the interest rates. What concerns most economists is that although the prices have been rising at pretty high levels, this is unlike other periods of inflation that the country had previously seen.
The root cause has been considered to be an increase in the prices of fuel and a lower supply of most consumer goods. This is also a classic recipe for inflation- as noted by Jeffrey Frankel- the famous economist. Another economist, Stiglitz believes that it could be quite reprehensible if the Federal Reserve decided to begin engaging in interest rate hikes. For- this would be leaving those at the bottom of the income scale to suffer the most.
Now, rather than just pushing out a stimulus check payment, several economists have been decreeing the idea of a one-time inflation adjustment tax cut for lower and middle-income households.
