Inflation over the past few months has become a bigger factor in the United States and here in Minnesota.  St. Cloud State Economist, Dean School of Public Affairs, King Banaian says how long this form in inflation will last is difficult to determine.

Banaian expects that the inflation rate when the latest inflation data is released later this week will be 6%.  He says a 5% or 7% inflation rate is also a possibility.  Banaian says he doesn't expect 6% inflation will be here for a long time as he expects that number to drop.

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Banaian says the reasons for inflation include depressed prices coming out of the pandemic in the spring, easy credit, and Federal Government stimulus checks.  Banaian says the first stimulus checks probably made a whole lot of sense because many people weren't working and were told they couldn't go to work.  He says the 3rd checks sent this last spring probably weren't necessary.

Banaian says wage increases for many workers didn't in many cases go up as high as the inflation rate.  Banaian says:

Six months from now or a year from now will our hourly workers get additional 5,6, 7% wages?  If they do then it gets embedded and gets concerning for people worried about inflation as a longer term issue.

Banaian says once these increases become embedded in a raised structure it is hard to break that without a pretty significant recession.  He says this happened in the early 1980s and could happen again.

I asked King if this inflation is a result of decisions made at the Federal Government level.  He says "yes" but to be fair some of this happened due to supply chain disruptions due to the pandemic.  Banaian says higher prices aren't always inflation.  He says prices can go up because something just became scarce.

If you'd like to listen to my conversation with King it is available below.

 

 

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