What Is Going on With Inflation and Why Do I Keep Hearing About It?

As we start to try and get the pandemic under control and leave the recession behind us, it seems one thing keeps making headlines, Inflation. First let us define what inflation is – it is the rate at which cost of goods and services rises or falls in an economy. Essentially, how far can your dollar get you.

Is all inflation bad inflation? No – The Federal Reserve (US Central Banking System) has set their ideal target for around 2.1-2.4%. Inflation is best and natural when it is consistent and thus people can plan for it, and it grows alongside your income. But because of the events that have taken place over the last year, inflation is not consistently sitting around that mark.

What is the cause of inflation? Well, there are a few things that can lead to this. Increase in Money Supply, Stimulus, Supply chain issues, and Demand issues just to name a few. These are all factors that have been exacerbated by the pandemic.

How is it measured? The most efficient way to gauge inflation in the economy is by looking at the consumer price index. The CPI measures the average change in prices over time that customers pay for goods and services. US Consumer price index rose to 4.2% from a year ago last April (BLS) this is the sharpest increase since the Great Recession of 2008. Though a staggering increase, the Fed and Economists have not fully hit the panic button yet.

What does these mean for you and your money? As inflation is rising it is important now more than ever to make sure your money is getting you where it needs to achieve your financial goals. If it is retirement, college funds, wealth planning or more it is pivotal to meet with a financial advisor and discuss your investing and how to keep your assets protected.

Here are Potomac Financial we have over 30 years of helping clients select the best investment management approach for their private wealth with the least amount of risk. We focus on capital preservation and growth consistent with financial plans. This approach includes personal retirement planning, risk management, family education funding, financial protection planning and assisting the business owner with company-sponsored retirement and group-health plans. We unite insurance and financial planning, so our clients know their business and personal wealth are taken care of in one place.

If you have any questions about this article or want to learn to see if we could be the right advisor for you, please feel free to reach out. My email is PEsposito@PotomacIFS.com or call our company line at (703) 354-3501

Patrick Esposito