These policies initially sparked a recession in 1981 and 1982, with unemployment hitting 10 percent at one point. By the end of 1982, inflation had declined to 5 percent and the Fed Funds rate was back at 9 percent. This was deemed a success at the time.

What Is the Inflation Rate in 2022?

According to the Bureau of Labor Statistics (BLS), consumer prices rose 8.3 percent for the 12 months ended April 30, 2022. This is not a seasonally adjusted number. Expectations for the full year vary, with many forecasts in the 6 percent annual range.

What Are the Social and Economic Factors Causing Inflation to Rise in 2022?

Experts point to a variety of factors that have caused the inflation that we are seeing so far in 2022:

Strong demand. The generous $5 billion stimulus package put forth by the Biden administration helped to keep consumer demand for goods and services strong. These stimulus checks allowed consumers who were otherwise negatively affected by the pandemic to maintain their spending in many cases.

Supply-chain issues. Supply-chain issues across a vast array of industries have been widely reported by the news media. There have been stories of cargo ships stuck in ports with not enough workers to unload them. This has resulted in scarcity for many products, fueling higher prices. A key example is the price of gasoline. Shortages and high demand have resulted in near record costs at the gas station.

Raw materials shortages. Related to supply-chain issues are shortages of some key raw materials. In the case of food, some of this has been driven by issues in the agriculture sector, including the impact of droughts here and abroad, the bird flu epidemic, and the war in Ukraine. All of this makes certain ingredients and raw materials harder to get and has served to drive prices up.

Worker shortages. The Great Resignation has been widely documented in the media, and its impact has cut across virtually all industries. The pandemic has led many workers to either leave the workforce or to move on to greener pastures elsewhere. Many companies are having to offer more generous wage packages to attract and retain workers. This worker shortage extends beyond white-collar workers. Many restaurants, stores, and even gas stations are having staffing issues.

Will Inflation Decline or Level off in 2022?

Many experts are predicting that inflation will level off a bit as we move forward in 2022, perhaps ending the year around 6 percent. This is still high compared with what the economy has experienced in recent years.

Instant Insights /

What's up with All This Inflation?

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