Inflation jumps
Posted on June 13, 2008 3 Comments
It may be time to adjust your budgets. I’m noticing a change in my bank accounts – are you?
AP: Inflation rate jumps highest in six months
By MARTIN CRUTSINGER, AP Economics Writer
WASHINGTON – The inflation rate shot up in May at the fastest pace in six months, pushed higher by soaring costs for gasoline and other types of energy.
Along the same lines, I read something yesterday on “stagflation.” Can anyone explain that concept?
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June 13th, 2008 @ 3:06 pm
Nicole,
Please explain the changes you are seeing in your bank account and how you plan on adjusting your budget.
Here is the Wikipedia definition of stagflation, “a period of inflation combined with stagnation (that is, slow economic growth and rising unemployment), generally including recession.”
June 13th, 2008 @ 3:47 pm
Stagnation + inflation
When an economy is in a recession, there is little growth in businesses, companies are more hesitant to invest, etc. One way to battle it is to lower interest rates, making it more attractive to borrow and invest into business expanding projects. That’s why our rates went from 6 to 3% in your ING acct, etc.
However, if at the same time you are experiencing inflation, its turns out badly. Inflation is normally combatted by higher interest rates because that discourages borrowing and keeps money out of the economy, decreasing the inflation rate.
As you can see, when you have to problems the answers to which are completely opposite, you are sorta screwed–that’s stagflation.
June 13th, 2008 @ 3:47 pm
I wonder if she is referring to less money in the account while maintaining similar spending habits because food and gas are costing more. Therefore, we all probably need to be either increasing our food/gas budgets or trying to cut back somehow and maintain the same budget.