A recent article in the Wall Street Journal states “Last April, economists thought inflation would be around 2.5% right now. Instead, it’s over 6%. Even by the forgiving standards of economic forecasting, that’s a miss of epic proportions.” So, what’s the cause of this increase, and what does it mean? Some blame President Biden and the Federal Reserve for administering too much stimulus, others blame pandemic-related bottlenecks and supply chains.
However, it’s becoming clear that neither supply nor demand is individually to blame. It’s a combination of both. This inflation was caused by strong demand interacting with restricted supply.
The causes of this inflation were unusual, and the solution won’t be straightforward. “Ideally it will recede painlessly as distortions to demand and supply self-correct.” But this process could take a while, and it’s important to note that higher inflation could potentially become self-perpetuating.
How to Protect Your Retirement Against Inflation
Annuities are worth considering. A fixed index annuity provides a guaranteed income for you and your spouse that you cannot outlive.* Tip: If you want to ensure your income keeps pace with inflation, consider an annuity that offers a cost-of-living rider. You’ll receive a lower initial payout, but there’s some protection against inflation.
Read the full Wall Street Journal article here. If you don’t have a subscription to the WSJ, Forbes also has an interesting take on the current inflation problem. Read more here.
*backed by the claims-paying ability of the carrier