Q&A with Mary C. Daly, President of Federal Reserve Bank of San Francisco - Summary of article in AARP Bulletin
- Last year, economists believed inflation would go away on its own. What changed?
- Because of COVID, people stayed at home and had incomes that they would not of had. They were buying good to make it easier to be at home.
- But the same COVID impacted supply chains. When supply goes down, the prices go up this increasing inflation.
- Why has inflation lasted so long?
- Economists hoped COVID would subside due to vaccines and variants would be minimal. That has not been the case. Two years later and we are still trying to determine when we will be through COVID>
- Russia and Ukraine
- Russia is an exporter of Energy. People are worried that energy prices will continue to rise. That hits consumer pocket-books directly.
- Other headwinds
- Global Supply Chain - Low vaccination rates and effectiveness in Asia is causing factories to close. Economists are watching COVID rates in other parts of the globe to predict inflation. Continued lower supplies will mean continued higher prices.
- How does inflation impact older people that younger people?
- Older Americans are more likely to have fixed incomes.
- Inflation can eat away fixed incomes, which may be higher that SS cost of living increases.
- Fed is raising short-term interest rates. What will the immediate effect be?
- This will directly affect deposit rates for savings accounts. The more banks pay for savings, means the higher rates to borrow money. Fed is trying to slow down the economy.
- Will take 6 to 8 months to slow economy and impact that has on inflation.
- What will be the day to day signs that slowing the economy will curb inflation?
- Housing Market get more in balance with the economy.
- Labor Market will recover and business will be able to hire.
- Do we expect the 4 million Americans who left the labor force to reenter the job market?
- Two issues will impact how fast people reenter the workplace - COVID and employer flexibility.
- A big incentive for employers is the HAVE employees to run their business. They become more flexible with they run out of employees.
- What advice if there for living with higher inflation?
- Make substitutions, purchase different things.
- Find ways to economize without disrupting your life so completely that it feels miserable.
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