PHOENIX - As the U.S. continues to deal with the impact from high inflation, the Phoenix area is feeling more of the inflation's bite, with the city topping a list of U.S. cities with the highest inflation.
Here's what you should know about inflation and its impact on people.
According to the Cambridge Dictionary, inflation is "a continuing rise in prices caused by an increase in the money supply and demand for goods."
"Inflation, at its root, is too much money chasing too few goods," said Dennis Hoffman, a professor of economics at Arizona State University.
How high is the inflation rate?
According to data released on July 13, consumer prices rose 9.1% when compared to a year earlier, marking the biggest yearly increase since 1981, and up from the 8.6% jump in May.
On a monthly basis, prices rose 1.3% from May to June, another substantial increase, after prices had jumped 1% from April to May.
How bad is it in Phoenix?
It's worse. The Phoenix metropolitan area is looking at a 12.3% inflation rate - the highest among major cities in the US.
Residents are spending more than ever on groceries and gas.
Reports say the state's dependence on refineries out west for fuel is why gas prices are much higher, driving inflation in our region.
However, changes could be coming. While we won't see $3 gas any time soon, prices are expected to continue dropping.
How did inflation get so high?
Professor Hoffman says inflation, as people are currently experiencing, is a multifaceted problem that has been brewing for years.
"Too much money got into the system with easy monetary policy for the better part of the last 15 years and large stimulus injections during the pandemic, and that was coupled with supply shortages," said Prof. Hoffman.
According to the Associated Press, the economy staged an unexpectedly rousing recovery following the start of the COVID-19 pandemic, fueled by vast infusions of government aid and emergency intervention by the Fed, which slashed rates among other things.
By spring of 2021, the rollout of vaccines had emboldened consumers to return to restaurants, bars, shops, airports and entertainment venues. Suddenly, businesses had to scramble to meet demand. They couldn’t hire fast enough to fill job openings or buy enough supplies to meet customer orders.
As business roared back, ports and freight yards couldn’t handle the traffic. Global supply chains seized up. With demand up and supplies down, costs jumped, and companies found that they could pass along those higher costs in the form of higher prices to consumers, many of whom had managed to pile up savings during the pandemic.
Who's to blame for the high inflation?
Critics blamed, in part, President Joe Biden’s $1.9 trillion coronavirus relief package, with its $1,400 checks to most households, for overheating an economy that was already sizzling on its own.
Many others, however, assigned a greater blame to supply shortages, and some argued that the Fed kept rates near zero far too long, lending fuel to runaway spending and inflated prices in stocks, homes and other assets.
Prof. Hoffman also said that in a global economy, the U.S. implementing tariffs or cutting off trade with countries hurt the average American consumer.
"There’s going to be consequences not just to them, but to everybody, and prices are going to go up," said Prof. Hoffman. "You cannot immediately convert to domestic production for everything when you’ve been so dependent on globalization for decades."
Are we the only country in the world facing higher inflation right now?
Prices are rising just about everywhere in the world, in part a consequence of Russia’s invasion of Ukraine, which has elevated energy and food prices, and in part because of the supply chain bottlenecks that have driven U.S. prices up.
Are there some places in the U.S. where inflation is higher than the national average?
According to government data, the inflation rate in Phoenix stands at 12.3%, joining other metropolitan areas like Atlanta, Baltimore, Houston, Miami, and Seattle as cities where the inflation rate is higher than the national average.
When will high inflation stop?
No one knows for sure.
High inflation could endure as long as companies struggle to keep up with consumers’ demand for goods and services. The Fed foresees inflation staying above its 2% annual target into 2024.
Prof. Hoffman says people have two options: live with fewer goods and services, or pay more for them.
"We all feel some pain, but some of us feel a lot more pain than others, and I think that’s the real challenge with inflation," said Prof. Hoffman. "It just simply doesn’t hit everybody equally."
Some, however, say relief from higher prices might be coming. Oil prices have been tumbling on fears of an economic downturn, and jammed-up supply chains are showing some signs of improvement, at least in industries like transportation.
Meanwhile, commodity prices have begun to fall, and pay increases have slowed. Surveys also show that Americans’ expectations for inflation over the long run have eased, a trend that often points to more moderate price increases over time.
"I would think we’re going to see some continued softening in prices at the pump," said Prof. Hoffman. "Are they going back to $2 and $3 a gallon? I don’t think so, not anytime soon."
The Associated Press (AP) contributed to this report.