Article Title: U.S. Consumer Prices Up 2.1% in December from Year Earlier
Date: Jan 18, 2017
Source: The Wall Street Journal
The article from the Wall Street Journal about the rise of the inflation rate in the U.S. by 2.1% describes how the rise will affect the American economy as well as the lives of everyone living here. The article which was written by Kate Davidson and Eric Morath raises concerns about the significant possibility of experiencing a further increase in the prices of different commodities all over America. According to the piece, the increased inflation which was recorded in December last year is certainly going raise the cost of living by a significant amount. The last time an annual inflation rate of above 2% was last recorded was in 2014. The effects on the economy are likely to resemble the ones that took place then.
The fact that consumer prices rose by 2.1% and consumption has remained the same, shows that the impact on the consumer pockets is inevitable. The demand for essential commodities like food, clothing, and gasoline are likely to remain constant throughout no matter the extent of the changes in pricing since they are a necessity for the ordinary citizen. When the prices for such commodities rise, the whole economy is shaken as stated by Sparshott and Morath (2014). The impact is felt in charges involved in business operations, mortgages, loans, the yield on government and corporate bonds, and the cost of living.
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Inflation can affect the economy in different ways. It can be negative at times and positive on other occasions. The increase in price commodities can be of great benefit for economic recovery. If it occurs and is not controlled, the country involved is likely to suffer greatly. However, inflation can be maintained at reasonable levels to ensure the prosperity of the economy. When managed, it leads to increase in employment opportunities, growth in consumer income and a healthy economy. Governments should ensure that they control inflation to prevent an adverse effect on the economy.
Reference
Sparshott, J.,& Morath, E. (2014). U.S. Inflation Gauge Tops 2%, Supporting Fed’s Plan to Raise Rates. The Wall Street Journal. Retrieved from: http://www.wsj.com/articles/u-s-consumer-prices-up-2-1-in-december-from-year-earlier-1484746534
