How out of control is inflation? One measure says it all: Prices are now rising as fast in one month as they used to rise in a whole year when President Joe Biden took office.
The measure of inflation that gets the most attention is the consumer price index (CPI), which estimates the prices consumers are paying for a typical combination of goods and services. The CPI rose 8.5% in the 12 months from March 2021 to March of this year – the fastest increase in four decades.
The administration, seeking to salvage plummeting poll numbers, dubbed this “Putin’s price hike.” But there is considerable evidence that prices in March were going to be elevated, regardless of the war in Ukraine.
The highest consumer price increases in decades have been baked into the cake for months. That’s because of previous price increases for businesses, known as wholesale inflation, which are eventually passed along to consumers.
If prices were to increase for a single business owner, it would be relatively difficult for him to pass those cost increases on to his consumers, and he may face operating at a continuing loss. But because inflation causes the costs for every business to increase, prices can be raised without losing customers to competitors, as no competitor is able to keep costs down without sacrificing the quality or quantity of their offerings.