MINNEAPOLIS — When you woke up today, you woke up to a record breaker that is starting to feel like a broken record — every month is a new, all-time high, and this last month is no different.
The U.S. Labor Department announced Tuesday that the national inflation rate increased 8.5% year over year for March, while here in the Twin Cities metro, it came in at 8.2%.
To better understand what inflation is, let's begin with what inflation isn't: It isn't gas prices; it isn't energy costs; it isn't supply chain woes; it isn't a housing cash grab — it's all of the above.
"Gas prices went up and down in the past; housing prices have gone up and down in the past — that's not inflation. Inflation is gas prices went up, and food prices went up, and housing went up, and services went up," said economics professor at the University of Minnesota Dr. Mark Bergen.
All of these at once, blowing every stop sign along the way, and, in most cases, outpacing your wage increases.
You don't need an economist to tell you that hurts — you already know it.
"Absolutely, it just seems endless," said Bergen. "So now people have to start to figure out how to live with inflation."
Living with it means making hard choices because the three big categories aren't discretionary. Energy, housing and food are all things we need in order to live.
"That is kind of what happens when inflation stays with us in these categories. We start to change our behavior more fundamentally and make some of these harder trade-offs," said Bergen.
One of those behaviors involves figuring out how to drive less, because right now, gas prices are 40% higher than they were at this time last year. Nationally, they are 50% higher.
Food is just as hard. Grocery prices in Minnesota are 7.3% higher than they were this time last year.
And restaurant prices? They're 8.8% higher.
So, why has it been like this for six straight months?
"Kind of a perfect storm," said Bergen. "A combination of a lot of cost increases that have happened from supply chain disruptions, to the war to a bird flu, and things like that."
Supply still hasn't gotten its footing back as we slowly approach the other side of COVID, and at the same time, demand was higher than supply was ready to meet.
Making matters worse, the avian flu is shutting down production and entire areas of food supply for days or weeks at a time.
Adding to supply chain issues is war, which is taking energy to its highest price point.
But, wait: What about the Fed?
"If you were thinking that the Federal Reserve took action, therefore this should have been solved, it doesn't work that quickly," Tyler Schipper, an assistant economics professor at the University of St. Thomas, said.
It will take more rate increases, which are forecast to come, but even that won't solve it all.
The Fed can't increase energy supply globally, or the supply chains themselves.
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