The consumer price index rose again in March as the country has struggled with high inflation for decades. The Bureau of Labor Statistics reports that year-over-year inflation in March was 8.5%. American Farm Bureau Federation chief economist Roger Cryan says we are seeing the highest level of inflation in 40 years.
“The Federal Reserve Bank has the levers to manage the money supply, and there was a 40% increase in the money supply from March 2020 to last December. So for almost two years a lot of people in the economy had confidence in the system and prices haven’t moved much, but now there’s so much money out there inflationary expectations are building and what we are seeing now is an acceleration in inflation. I don’t know whether or not to define this as runaway inflation, but it will start to look like that.
Cryan says inflation has several effects for farmers.
“Inflation creates a lot of price uncertainty, it creates a disconnect between long-term and short-term prices, it creates a lot, in a way, of chaos among relative prices that you don’t necessarily have when things are stable. It also creates a disconnect between long-term and short-term lending. However, long-term loan rates are also rising now, and the 30-year mortgage rate is rising relatively quickly.
He expects inflation to persist for a year or two.
“Even if the Fed starts pulling us back towards what should be the normal money supply growth rate, there is just a lot of liquidity in the market that needs to work its way through the system. And we certainly hope that the Fed will start paying attention to the money supply, and hopefully they will recognize that this is really the indicator that they need to pay attention to. Stopping inflation is really essential. It’s important that we take care of this, there may be short term pain to get it over with, but it won’t be anything like long term pain if we don’t.
Source: ANFB press service