NASHVILLE, Tenn. (WKRN) — Consumer prices increased at the fastest pace in 13 years last month, and many Middle Tennesseans are feeling the impacts. The COVID-19 pandemic is likely a factor in rising prices, and economists say it will take time before inflation levels off.
“Inflation refers to when in general prices are rising,” says Steve Reed, an economist at the Bureau of Labor Statistics. “We measure price change, and when the prices are sort of consistently rising over time, that’s called inflation. And in terms of why that’s important, well, inflation sort of defines the value of money, right? The more things cost, the less you can purchase the given amount of money.”
The consumer price index, often used as a measure of inflation, typically sits around 2 percent. However, over the last 12 months, it has soared to 5.4 percent, and the pandemic is at least partially to blame.
“Recovering from COVID has given us a situation where we’re demanding more, right, the economy’s opening up or wanting more stuff. But some of the supply interruptions of COVID are still lingering. And that’s those two things are probably contributing to inflation that we haven’t really seen in quite a while,” says Reed.
Inflation combined with a white-hot real estate market can also impact who has the funds to buy a home. Skyrocketing house prices have already led to homeownership being out of reach for many Middle Tennesseans, and higher inflation means residents will have fewer funds to buy a home.
“We’re showing rents increasing, but not as dramatically as the purchase price of houses is increasing. Certainly, you know, the price of houses is increasing. And that means that it takes more money to afford a house, and that is important to people.”
The question that many economists are debating is whether this rise in inflation will continue or if it is a temporary side effect of supply chain disruptions from the COVID-19 pandemic.