Vermonters deal with highest inflation in 40 years, reaching 8% over the last year
The rate of inflation reached 8% over the last year, the highest level seen in more than 40 years, according to John Pelletier, director of the Center for Financial Literacy at Champlain College.
To make matters worse, the spike in prices follows about a dozen years of inflation averaging under 2%, Pelletier added.
"You have to go back to the late 1970s and early 1980s to see inflation rates this high," Pelletier said.
The war in Ukraine and the oil shock it precipitated, sending gas prices to nearly $5 per gallon, are familiar causes of soaring inflation, according to Pelletier.
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"Wars, demand for goods in excess of supply and oil shocks all cause inflation," Pelletier said. "One or more of these three factors existed in every high inflationary period in the United States since World War II."
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Bringing inflation under control is notoriously difficult, Pelletier said, and really boils down to one thing: the Federal Reserve raising interest rates to cool the economy — but not too much.
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"Most of the time, post World War II, when the Fed has raised interest rates to put a cap on inflation, more often than not they overtighten and we go into a recession," he said. "That's where the fear is right now, that we'll go into a recession."
But to do nothing is not an option either.
"Inflation is a bad thing for everyone, bad for savers, bad for people on fixed incomes, bad for people saving for college or retirement, bad for people just going to the grocery store," Pelletier said. "I'm sure you're gagging when filling up with gas like I am."
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Pelletier doubts we'll see 2% inflation again any time soon, but hopes we can get to the 3% to 4% range.
"I want to believe the Federal Reserve will get this under control," he said.
Contact Dan D’Ambrosio at 802-660-1841 or ddambrosio@freepressmedia.com. Follow him on Twitter @DanDambrosioVT. This coverage is only possible with support from our readers.
This article originally appeared on Burlington Free Press: Inflation tightens grip on Vermonters' budgets as it reaches 8%
