Local Economics Professor Says Inflation Will Remain High In 2022

(KNSI) – The latest inflation numbers released by the U.S. Department of Labor show inflation is at its highest in 40 years. The consumer price index (CPI) rose by 7.5% from January 2021 to January 2022, the highest since 1982. Professor of Economics and the Dean of the School of Public Affairs at St. Cloud State University, King Banaian, explains the CPI.

“So that tells us for an average citizen if they’re receiving for example wage increases how much of that is just covering the increased cost of living versus how much of that is actually ending up being an increase in their real income and improving their living standards.”

He says the CPI is a bundle of goods that economists think the average person buys. The Bureau of Labor Statistics collects information on the price of things in the bundle, which includes everything from the cost of a new car or used car to the price of a home or rent to buying gas, clothing, and food. Banaian talked about how that impacts families.

“just to put it in really raw terms, it is adding on average about $250 a month to the cost of living. And that that $250 number is what’s happening to an average family right now. And that number probably is a little bit greater in St Cloud.”

Banaian says the increase in housing and rents affects millennials (people between 35 and 44 years) the hardest. He says St. Cloud’s population tends to be younger; therefore, housing increases lesson families’ buying power.

The SCSU professor says inflation is caused by policy decisions made during the pandemic that led to shortages of supplies, workers, heavy doses of federal aid, ultra-low interest rates, and robust consumer spending. Banaian thinks that inflation will keep going up in 2022.

“The reason I say it’s gonna last for a while longer is that we typically think of inflation as having inertia, right? Once you start having these price increases, it is hard to break that pattern. That’s what the that’s what policymakers are trying to deal with right now.”

He says it will be a while before we see inflation at the pre-pandemic level.

“Those numbers aren’t going to immediately go to zero, they’re going to actually change very slowly. And I think, therefore, even though some people might think inflation will go back to where it was before at 2%, I don’t see that happening in the next six months. And I even question whether it could happen in the next year.”

Banaian says he expects the Federal Reserve Bank to start raising interest rates next month to try and reign in the surging inflation rate.

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