The latest inflation rate numbers show an increase in prices of 9.1%. Ford School economics professor Justin Wolfers has been discussing the intricacies of elements and implications of that rate.
Reacting to the inflationary pressure, the Federal Reserve's actions could help or hurt, according to Wolfers. His comments at a Brookings Institution panel was quoted by MarketWatch: “The Fed could make a mistake and create a massive recession or the Fed could make a mistake and actually do an incredibly great job,”
In a tweet he stated, "Today, many families learned that the amount they owe on their mortgage has declined—in real terms—by 9.1% over the past year. Why do we hear so little about this? Why don't we see folks celebrating?" Forbes reacted to the tweet, and he explained to MarketWatch, "“It’s not a good thing for everyone. The claim is that some people benefit from inflation.”
It’s Econ 101, Wolfers said: If debt is valued at $X right now, when inflation rises, the money you owe doesn’t go up to $X+1, even if your wages go up; it remains at $X. (Provided that the interest rate is not adjusted, based on inflation.)
Money also quoted Wolfers at the Brookings panel: “The underlying rate of price [increases] in most parts of the economy is nowhere near 9.1%. That's not stating that the numbers are inaccurate, but instead, most prices are rising at 4% to 5%.”
The Fed could get lucky or things might go wrong. A guide to where the economy might go from here, MarketWatch, July 21, 2022
Here’s one group of homeowners who may be benefiting from high inflation, MarketWatch, July 19, 2022
An Economist Calls For Homeowner Celebration Over High Inflation, Forbes, July 15, 2022
5 key takeaways on inflation, housing, and energy from the June CPI report, Brookings, July 14, 2022
Inflation Is (Still) at a Record High, but a Few Items Are Actually Getting Cheaper, Money, July 13, 2022
