According to an economics professor on Wednesday, the skyrocketing costs for food and gasoline that Americans have witnessed in the Biden administration are expected to persist.
Brian Brenberg, executive VP and associate professor of Economics and Business at The King’s College, issued the warning as the Federal Reserve increased interest rates by half a percentage point on Wednesday afternoon, the biggest increase in over two decades.
“Food prices are at all-time highs,” said Brenberg. “Corn, soybeans, wheat, and other key input goods are still at all-time highs. Fuel continues to be extremely pricey. Those two factors will cause inflation in the U.S.,” said Brenberg. “I don’t think there’s going to be a sudden turnaround on that one.”
“Inflation’s a terrible problem, as is recession. The administration and the Fed have really backed themselves into a corner where we are facing one or the other today,” Brenberg added.
“If the economy starts to slow down in this country, people’s wallets are going to get a little bit thinner,” Brenberg observed. This will result in businesses investing less and not hiring as many employees, which means you’re now talking about a employment issue.
“The inflation began to ravage our economy in a major way last April. So now you’ve got double-digit inflation on top of that. Even if the rate falls by a little bit, it is based on prior inflation, which means consumers are still experiencing significant price increases,” he continued. “Whether you’re talking about food or fuel or housing, people across the country are getting hit by this and they feel it deeply. It’s not simply that it’s a minor inconvenience for them; they’ll tell you, ‘This is a tremendous problem.’”
The Federal Reserve’s rate hikes are meant to combat the high inflation that Americans are feeling under Joe Biden’s Democratic administration.
The Federal Reserve’s most recent action “will accelerate the effect on American wallets from moderate to more abrupt,” according to a Wall Street Journal report.
The change will more than likely lead to higher mortgage rates and, perhaps, a rise in credit card APRs. According to the study, however, the rate increase “might bode well for savers who have been paying low interest rates on savings accounts and certificates of deposits for years.”