Winning Bizness Desk

Mumbai. Inflation in America has reached a record high of 41 years by growing at the fastest annual rate since June 1981. This has happened due to the increase in the prices of gas to rent and food. The Bureau of Labor Statistics has released inflation figures. According to the data, the Consumer Price Index (CPI) in June has increased by 9.1% compared to the previous year. Earlier in May, its growth rate was 8.6%. Its growth rate is 1.3% on a monthly basis. This has increased pressure on the Federal Reserve to tighten its policy. That's nearly five times the Federal Reserve's inflation target of 2%.

Excluding volatile items such as food and energy prices, core CPI grew by 0.7% month on month and 5.9% year on year. Energy prices have increased by 7.5% in the month and 41.6% in the year while food price has increased by 1% in the month of June. Shelter cost increased by 0.6% and rental cost by 0.8% in June whereas gasoline prices are up 11.2% month on month and 60% year over year. Electricity cost increased by 1.7% month on month and 13.7% year on year and the prices of new and used vehicles have increased by 0.7% and 1.6%.

What is the reason for rising inflation?

Inflation generally increases when either demand increases or supply decreases. Many reasons are being given behind the rising inflation in America. One reason is related to the Russia-Ukraine war. White House officials have blamed the Russia-Ukraine war for the price hike. However, even before that attack in February, inflation was rising aggressively. President Joe Biden has called on gas station owners to lower prices.

The second reason is the demand supply gap.

America's economy has improved rapidly

Actually, due to rapid vaccination against Corona, America's economy has improved rapidly. This recovery, which was faster than expected, has led to a pick-up in demand. Along with this, consumers got relief due to the government's package. This package also helped a lot to those who lost their jobs in Corona. All these increased the demand. Supply could not increase in terms of this recovery in demand. This demand-supply gap became the reason for the rise in inflation.