High inflation could last into next year, NC economist says

A new report released Friday by the U.S. Labor Department shows that inflation hit nearly 7% last month, which is the highest its been in nearly 40 years. Local economist say that rising prices could last well into next year.

Posted 11:11 p.m. Dec 10, 2021 — Updated 11:11 p.m. Dec 10, 2021

Adam Owens

, WRAL reporter; Maggie Brown, WRAL multiplatform producer

RALEIGH, N.C. — A new report released Friday by the U.S. Labor Department shows that inflation hit nearly 7% last month, which is the highest its been in nearly 40 years. Local economists say that rising prices could last well into next year.

The reason for rising inflation is complicated, but North Carolina State University Economist Mike Walden said much of it has to do with an influx of cash from the federal government. More people have cash in their pockets, which means they are willing to spend more.

"The federal government pumped so much money into the economy, into household pockets and businesses pockets, we actually saw household income go up last year, therefore households are actually buying," Walden said. "So you have pressure on prices from the fact that people are spending money they want to spend.”

During the early months of the pandemic, many middle-income Americans worked from home and didn't spend as much money on gas, vacations or eating out. But once pandemic lockdowns waned, Americans started spending more — and had more money to do so.

In addition to federal government assistance, economists say wages are starting to rise, which means more people are going to spend money. But for low-income Americans, Walden said inflation has "eaten up" those pay raises.

Despite the high inflation, an AP-NORC poll from Thursday shows that the majority of Americans say that higher prices for goods and services have had a minor effect on their financial lives. Only a third of Americans earning more than $50,000 said rising prices have had "a major impact" on their financial lives, compared to 50% of Americans who earn under $50,000.

Dr. Peter Morris, executive director of Urban Ministries of Wake County, said he is concerned their food pantry will not be able to meet demand as more people are unable to afford food.

"We are worried the lines for our food pantry will increase back to early pandemic days, from 40 to 60 to 70 to even 90 cars a day," he said.

Walden believes that high inflation levels could stay elevated "well into 2022."

"We're in a once-in-a-lifetime situation," he said.

President Joe Biden on Friday said that — while he recognizes that inflation "is a real problem" — he feels the US is at the peak of price inflation.

"It's a real bump in the road. It does affect families when you walk into a grocery store and you're paying more for whatever you're purchasing -- it matters. It matters to people when you're paying more for gas, although in some states we've got the price down below three bucks a gallon, but the point is it's not gone down quickly enough. But I think it will," Biden told CNN's Kaitlin Collins.

Walden said the federal reserve needs to change their current policy because they have been keeping interest rates low and "pumping a lot of money, cash, into the economy."

"They need to reverse that if they want to get inflation down," he said.

U.S. Treasury Secretary Janet Yellen said she's confident that inflation rates will fall back to 2% sometime next year. She blamed the rising inflation on kinks in the global supply chain, which she said in an interview on NPR would straighten itself out soon.

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