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Iowa economist: ‘no doubt’ inflation will lower

Published: May. 31, 2022 at 10:40 PM CDT
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CEDAR RAPIDS, Iowa (KCRG) - Higher prices that have followed the pandemic have meant parent Ashley Keenan has had to make adjustments. “I really have to stretch that dollar sometimes.” While relief may not being coming immediately, one Iowan economist said inflation will not last forever.

Dr. Anne Villamil is a Professor of Economics at the University of Iowa. She said inflation following the pandemic is going on longer than experts expected. “I think the Fed did not consider the continuing supply chain issues.” She added it wasn’t just demand post-COVID that has led to higher prices—China’s policy in response to COVID cases is affecting supply. Russia’s invasion of Ukraine is, as well.

Tuesday President Biden met with the Chair of the Federal Reserve, Jerome Powell, and Treasury Secretary Janet Yellen. “The Fed has said it is not acceptable to have inflation this high...it is our job to fix this and we’re going to do it,” said Villamil. She added, “They’ve said, ‘And here’s how we’re going to do it. We’re going to increase the rates that we control and we’re going to run down our balance sheet.’ And they’ve been very explicit that we’re willing to do half point rate increases to get this under control...I have confidence that the Fed will control what it can control.”

With that confidence came certainty that the economic situation we knew before the pandemic would return. “There are a lot of things I’ll hedge on, but we’re going to get back to a long run equilibrium where the economy, you know, on average is growing between 2-3% and inflation bounces around 2%. I have no doubt about that. That will occur.”

When we see that situation is something Dr. Villamil cannot predict, though. “No one has a crystal ball. Will that happen in a year? Will it be two years? You know, could it be three years? Those are very relevant questions. Particularly if you’re thinking about buying a house. You would like it to be much sooner rather than later.”

Meanwhile, for parents like Keenan, the difference of a few dollars can really add up, so much so that she pointed to specific items at the grocery store that were costing her more. “I think I went to the store the other day and there’s this like, Panera Bread broccoli and cheese soup that I used to get for like three dollars. And I think it was five or six now. So yeah. Feeling it.”

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